A downdraft in foreign markets is tugging at U.S. stocks this morning, and for now Wall Street looks set to open lower.
US Airways is making headlines with a new bid for Delta Airlines and the big themes from yesterday in technology and jittery emerging markets will again dominate. Focus also shifts to Washington as President Bush unveils his Iraq strategy tonight and the new Congress takes on minimum wage.
The trade balance this morning and action in the energy markets could also drive stocks.
OIL PRESSURE Traders await oil inventories data, due at 10:30 a.m. Crude prices, meanwhile remain under pressure and oil is trading under the magic $55 per barrel level. Oil shook off its dive to two year lows yesterday and finished marginally lower, but above the technically sensitive $55 level. On the Money's Melissa Francis spoke with oil trader Phil Flynn last night, who said we have not seen capitulation yet.
CELL PHONE ENVY: Apple Inc, not to be confused with its former self Apple Computer, dazzled techno geeks with its pricey new music-playing, picture-taking, internet-trawling iPhone. Apparently, investors too were dazzled and punished the stocks of companies that make cell phones and hand held devices overnight. Check out Nokia,Samsung and LG. Our Jim Goldman will follow up today and tell us more about his talk yesterday with Apple CEO Steve Jobs.
SUBMERGING MARKETS: Commodities sensitive emerging stock markets have been feeling some pain, as the selling spree in commodities spreads to related equities. Hedge fund selling hit was reported to be a factor in Asian markets overnight.
"You've got two areas of risk -- commodities and emerging markets," our Bob Pisani said. From the floor of the NYSE, Pisani discussed the selling in Russian, Brazilian, Chinese and Venezuelan equities and will no doubt be watching the trend today. "They (Investors) are getting jittery about countries that are exposed to global commodities."
BIGGEST LOSER: Investors in Venezuela were by far the biggest losers when stocks in Caracas dropped 19 percent after President Hugo Chavez said he would rein in energy assets and nationalize the biggest telephone company and electric utilities. Chavez is expected to clarify his plans this morning after he is sworn in for his third term. Venezuelan stocks registered their biggest one day decline ever as investors pulled the sell lever in response to his move.
Our Rick Santelli said traders are examining their portfolios for risk exposure as they cautiously monitor the situation in Venezuela. "As people get worried about the edge of the puddles, they have a tendency to clean up everything and they become more adverse to risk," he said. There are more than a few puddles out there today. Investors are also watching the feud between Belarus and Russia, which may have found a compromise that allows Russian crude to once more flow to Europe.
WALL STREET MYTHOLOGY: So the saying goes that as go the first five days of the year, so goes the month of January, and so goes the year. Well the S&P 500 is lower after the first five trading days. Traders can sure be a superstitious bunch.
WARY EYE ON WASHINGTON: Wall Street watches Washington when it needs to, and it's watching today. First, the new Congress is tackling the minimum wage with a view to raising it nationally.
IRAQ PHOBIA: President Bush's Iraq strategy, to be unveiled at 9 pm tonight, will dominate the talk from Washington today. Our John Harwood will keep us informed. The plan is expected to include new troops and more modest spending plans to spur economic growth, such as smaller scale reconstruction projects and micro finance aid.
Surely in the back of the minds of oil traders is the point made by both the Wall Street Journal and NBC News yesterday. That is that Arab allies fear that if the strategy fails, the struggle could spill over Iraq's borders and a broader conflict could break out in a region that provides much of the world's oil.