Stock Market Outlook: 11 September 2008

The S&P 500, along with the other major stock market indices, was able to regain some ground today as it found support after yesterday's 3+ percent downturn. The key contributor to today's recovery was the decrease in the price of crude oil. Crude fell to $102.58 per barrel today. The amazing thing about today's drop in crude oil prices is it came after the OPEC ministers announced that the cartel will be cutting production by 500,000 barrels per day. Now, while 500,000 may seem like a large number initially, you have to look at it in comparison to the world's total daily crude production of approximately 82,500,000 barrels per day. When you look at it from this perspective, you can see that this 0.6 percent cut in the supply of oil isn't going to have much of an effect on the price of oil.

The Energy sector was the big winner today after the market found it had less to worry about now that it knows OPEC is not going to cut production by any significant amount and that Hurrican Ike is most likely not going to cause much disruption to oil production.

On the flip side, the Financial sector was the big loser today as Lehman Brothers' woes continue to weigh on the minds of traders who are wondering if the credit crisis is going to end anytime soon---allowing banks to increase their lending and the market to find a bottom.

Looking forward to tomorrow, chances are good that the longer-term down trend the market is currently in is going to continue. We do get the U.S. Trade Balance numbers tomorrow, and while the numbers will most likely show we spent less importing oil last month because the price of oil has been steadily falling, it will most likely also show that U.S. exports slowed, thanks to the resurgent strength of the U.S. dollar (USD). Slumping exports is bad for the U.S. economy and U.S. businesses, and we will most likely see that negative news reflected in tomorrow's market performance. Of course, I could be way off (which I hope I am), and we could see a rise in exports in tomorrow's numbers. If that is the case, we should see a resurgence in the stock market.

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3.25 Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved."