U.S. Stocks Bounce Back and Brexit Brakes: Market Wrap

U.S. stocks overcame a volatile morning to finish higher on Monday, though trade-related risks remained in focus following the arrest of a high-ranking Chinese technology executive. The U.K.’s Brexit process stalled on the eve of a critical parliamentary vote after Prime Minister Theresa May’s cabinet warned of a major backlash in the House of Commons.

Stocks Push Higher

Wall Street turned positive in the final hour of trading, with the S&P 500 Index gaining 0.2% to 2,637.72. The large-cap index was down as much as 1.9% earlier in the day.

At the sector level, losses on Monday were largely concentrated in energy and financials shares. Large gains were reported for information technology and communications services.

A strong performance in tech-related sectors drove the Nasdaq Composite Index firmly higher. The benchmark added 0.7% to close at 7,020.52.

The Dow Jones Industrial Average reversed losses and gained 34.31 points, or 0.1%,to close at 24,423.26. The Dow was briefly down more than 500 points on Monday.

Brexit Vote on Hold

In the face of broad opposition, U.K. Prime Minister Theresa May has delayed a parliamentary vote on her government’s Brexit plan, a move that could undermine the March 2019 timeline for leaving the European Union. As The Wall Street Journal reported, May postponed he vote, originally scheduled for Tuesday, after consulting with her cabinet. Cabinet members believe that May’s bill will have little chance of being passed amid the ongoing debate over Northern Ireland’s border following Brexit.

The news triggered a massive drop in the British pound, which fell on Monday to the lowest level in over a year. Sterling bottomed near $1.2510 U.S. before recovering around $1.2556 U.S., where it was still down 1.3%.

Theresa May has struggled to fulfill her government’s Brexit mandate since she took over as prime minister from David Cameron more than two years ago. This included botching an early election, which weakened her party’s standing in the House of Commons, and struggling to unite hard Brexiteers with those calling for a softer exiting from the EU.

Oil at a Standstill

The price of crude resumed its defensive posture on Monday, as traders continued to doubt the ability of OPEC and its allies to re-balance an oversupplied market.

On Friday, the Organization of the Petroleum Exporting Countries and Russia agreed to curb their daily crude production by a combined 1.2 million barrels. The output cut is intended to bring global supplies back in line with demand ahead of a tepid consumption forecast for 2019. Slower economic growth and trade uncertainty between China and the West are expected to put a damper on crude demand over the next 12 months.

Citi, a U.S.-based financial institution, believes global crude prices will average $60 a barrel in 2019, which is virtually identical with today’s prices. Citi analysts believe that OPEC’s production cuts may push prices higher in the short run, which will allow U.S. producers to ramp up their production over the longer term.

“OPEC+ did the work of drawing down inventories that otherwise would have to be done through a painful period for shale producers,” Citi said in a research note, according to CNBC. Additionally, “the more OPEC+ tries to support prices by withholding oil from the market, the more they give the US shale sector an out from rationing supply growth themselves.”

As Hacked recently reported, the United States recently became a net exporter of crude for the first time in 75 years, raising optimism for a new era of energy independence.

Featured image courtesy of Shutterstock.

Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi