Oil Slides and Fear Rises

Over the weekend, Saudi Arabia decided to keep oil production running strong. This caused the price of crude oil to continue its free fall. The big question for the coming week is will the FOMC raise interest rates? Given all of the hints and eye winking by committee members, I believe they will raise rates to save face but will not raise them 0.25%. Instead I’m looking for a (token) 0.10% rise instead.

Monday, stocks in Asia moved little and closed nearly unchanged. In Europe, stocks rose 0.4% In the U.S., stocks fell 1% on moderate volume. That was enough to edge turkey stock IBM just below the 140 mark again. The VXO gained 6% to close at 16.22 and the 10-Year U.S. Treasury Bond yield fell 2% to end the day at 2.23%. Oil slid 6% to close at 37.69 while precious metals dropped 2% and their miners lost twice that amount.

Tuesday, stocks fell worldwide — 1.2, 1.8, and 1 percent in Asia, Europe, and the U.S. respectively on moderate volume. The VXO jumped up 10% to close at 17.87, while crude oil recovered a little, gaining 2% to close at 38.17. Wednesday, stocks fell again around the world but this time moderately — losing 0.5% in Asia and Europe and 0.4% in the U.S. on moderate volume. The VXO fear index ramped up another 12% to close at that magic 20 level between risk on and risk off.

Thursday, stocks rose just slightly in Asia and fell slightly in Europe. In the U.S., they rose 0.5% on light volume. Friday, stocks fell again worldwide. While in Asia the decline was a moderate 0.4%, they nosedived 2.1% in Europe and 1.9% in the U.S. on moderate volume. This dragged the NASDAQ well below the 5000 and pulled the NYSE Index below 10,000. The VXO fear gauge shot up 30% to close at 25.28. Crude oil slipped 4% to end the week at 35.35. The 10-Year U.S. Treasury Bond yield fell 4.5% and closing at 2.14%.

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