Dow loses 600 points, US crude posts longest losing streak on record

·Reporter

Mon, Nov 12, 2018, 1:00 PM

In this article:

Stocks fell, the dollar rose and domestic oil prices slipped for the eleventh consecutive day, marking the longest losing streak on record.

The S&P 500 (^GSPC) fell 1.97%, or 54.79 points, as of market close. The Dow (^DJI) tumbled 2.32%, or 602.12 points, led by declines in Goldman Sachs and Apple. The Nasdaq (^IXIC) fell 2.78%, or 206.03 points.

Notably, utility stocks PG&E and Edison fell significantly on concerns of the companies’ exposure to the ongoing California wildfires. Meanwhile, Apple and its suppliers slid after one of the tech giant’s main component-makers cut guidance and hinted at declining demand for Apple products.

Domestic oil prices initially rose Monday morning after Saudi Arabia’s energy minister said the country, one of the world’s largest exporters, will cut exports by half a million barrels per day next month. However, oil prices later reversed course and ended the day in the red for the eleventh consecutive day. Meanwhile, the dollar currency index (DX-Y.NYB) edged up 0.67% to 97.55 as of 3:54 p.m. ET to the highest level since mid-2017.

The bond market is closed Monday for Veterans Day.

NEWS: World’s top oil exporters mull production cuts, California wildfires continue destruction

Saudi Arabia will slash oil exports by about 500,000 barrels per day from November to December, Khalid al-Falih, the country’s energy minister, said over the weekend at a meeting of oil producers in Abu Dhabi. Falih added there may be a need to cut next year’s oil supply by around 1 million barrels per day from October in order to balance an over-supplied market. Russian oil minister Alexander Novak said Russia will consider cuts if they are approved by producers including OPEC. Russia and Saudi Arabia are the world’s largest exporters of oil, according to US government data.

The discussions of oil export and production cuts come in the midst of concerns of a supply glut. Brent crude, the international benchmark, was down about 20% from its Oct. 3 high to $70.18 last week. Output has continued to accelerate for domestic oil, sending prices for West Texas intermediate crude tumbling. Domestic oil prices initially rose Monday morning but gave up gains later in the day, falling to $59.93.

President Donald Trump said in a Twitter post Monday that he hopes OPEC countries will not go through with plans to cut oil production and added that prices should be much lower based on supply. Trump last week took credit for the recent sharp declines in oil prices after temporarily exempting eight countries from sanctions on oil exports from Iran.

“I really did it because I don’t want to drive oil prices up to $100 a barrel or $150 a barrel, because I’m driving them down,” Trump said in a press conference last week. “If you look at oil prices, they’ve come down very substantially over the last couple of months. That’s because of me. Because you have a monopoly called OPEC…and I don’t like that monopoly.”

Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!
— Donald J. Trump (@realDonaldTrump) November 12, 2018

The Camp Fire and Woolsey Fire in California have killed at least 31 individuals and caused thousands to evacuate as of Monday morning. The fires – the most destructive in the state’s history – have so far destroyed more than 6,700 structures and could cost at least $19 billion in damages to the state, insurers and homeowners, according to Bloomberg estimates. California Governor Jerry Brown urged President Donald Trump to declare a major disaster, which would help garner more emergency funds. Trump over the weekend threatened to cut funding to California and blamed the fires on poor “forest management.”

West Coast utility stocks PG&E (PCG) and Edison (EIX) both plunged as the wildfires devastate the companies’ service areas. PG&E’s stock dropped as much as 38%, sparking a volatility trading halt, while Edison’s stock plummeted as much as 25%. Evercore ISI analyst Greg Gordan cut PG&E’s price target to $49 from $55 and estimated $3.5 billion in exposure to liability from the Camp Fire. Susquehanna estimates that PG&E’s liability to the Camp Fire may be between $4 billion and $5 billion. The stocks pared some losses by market close, with PG&E shares down 17.41% and Edison shares down 12.21%.

STOCKS: GE shares fall again, Aurora Cannabis sees boosted production

Shares of General Electric (GE) fell below $8 for the first time since the financial crisis after CEO Larry Culp told CNBC he intends to reduce the company’s leverage levels through asset sales and acknowledged that “the stock has been under pressure” recently. Culp, appointed chairman and CEO at the beginning of October, reiterated that GE has no plans for an equity raise. Shares of General Electric fell 7% to $7.98 each as of market close.

Aurora Cannabis (ACB) reported its first quarterly results since the company made its New York Stock Exchange debut in October. Revenue for the first quarter of 2019 came in at C$29.7 million, up 260% over last year, while net income was C$104.2 million. Gross margin on cannabis rose 12 percentage points from the year-ago period to 70%. Total kilograms of cannabis sold were 2.68 million. The company anticipates that it will have a production run rate north of 150,000 per year, from 70,000 kilograms annually currently. Aurora Cannabis is among the first Canadian pot stocks to report results since Canada legalized adult use cannabis in early October. Shares turned around after rising Monday morning, falling 4.53% to $6.96 each as of market close.

Concerns of deteriorating demand for Apple products hit share prices of the tech giant’s suppliers Monday. Telecom equipment company Lumentum Holdings (LITE) cut its second-quarter forecast and said one of its largest customers – implying Apple – asked to “meaningfully reduce shipments” for orders, sending shares tumbling 30%. Other Apple suppliers including Cirrus Logic (CRUS), Qorvo (QRVO) and Skyworks Solutions (SWKS) also declined, and the Philadelphia Semiconductor Index (^SOX) fell by more than 3%. Shares of Apple (AAPL) declined 5.04% to $194.17 each as of market close.

Traders gather at the New York Stock Exchange. (AP Photo/Richard Drew, File)

Shares of British American Tobacco (BATS.L) fell on news that the US Food and Drug Administration may ban menthol cigarettes in the United States. Morgan Stanley estimates that US menthol cigarettes account for 25% of total earnings for BAT. Shares of BAT were down 10.62% to $2,962.50 each as of the close on the London Stock Exchange.

Alibaba (BABA) surpassed its previous Single’s Day sales record, with shoppers spending a record RMB 213.5 billion ($30.8 billion) in gross merchandise value, representing growth of 27% over last year. Shoppers ordered more than 1 billion packages in 24 hours from 180,000 brands on Alibaba. The Chinese e-commerce company’s results handedly exceeded online holiday shopping in the US last year, when consumers spent $14.5 billion online during Thanksgiving, Black Friday and Cyber Monday, according to Adobe data. Shares of Alibaba slipped 1.66% to $142.45 on the New York Stock Exchange as of market close.

SAP (SAP) is acquiring Qualtrics for $8 billion in an all-cash deal approved by boards of both companies and Qualtrics shareholders, SAP said in a statement. Qualtrics, a survey software tool-maker, had filed for an IPO in October and was expected to go public later this week. Shares of SAP fell 6.36% to $101.42 each as of market close.