Wall Street will get back to business fast Tuesday as it assesses the aftermath of Hurricane Gustav and starts to consider the first of a number of important economic reports this week.
Oil tumbled more than $4 per barrel to near $111 Monday in electronic trading as traders determined Gustav did not seriously damage the oil and gas infrastructure in the Gulf of Mexico. However, some traders say the selloff may have been too severe and oil, natural gas and gasoline could be in for a bounce Tuesday. The government reports that 100 percent of oil and 95 percent of natural gas were shut in as of Monday.
Gustav made landfall as a Category 2 hurricane, about 70 miles southwest of New Orleans. Traders are watching a new tropical storm, Ike, to see if it heads toward the Gulf.
"I think we'll go back and touch just below the $110.60 low (per barrel), and then head higher," said John Kilduff of M.F. Global. "The selling today was overdone, and I think of all the problems that could persist, it's going to be the refinery sector that will lag in the recovery. We're talking about several cold restarts and those take some time, not to mention the concerns over oil supplies and whether or not Strategic Petroleum Reserve oil is going to be required in order for them to run."
While gasoline was lower in the futures market Monday, it should jump in the spot market Tuesday. Drivers may also see a temporary increase at the pump in some areas. As a result of Gustav, refineries along the Gulf coast were shut down, and shipping was stopped in the Gulf, and that may impact shipments of jet fuel, diesel and gasoline to some markets.
"You've had a lot of refineries come off line. We're going to lose about a million barrels a day of gasoline production," said Andy Lipow of Lipow Oil Associates. "That's about 11 percent of our national demand. So, we're going to have to rely on imports and inventories to get us through, which means up and down the distribution line from Louisiana northbound all the way to Virginia, we might see sporadic outages in the next two weeks."
Lipow said if refineries are undamaged, they take five to seven days to get back to full strength.
Tuesday's data includes ISM manufacturing and construction spending, reported at 10 a.m.
Doug Prskalo of Blue Capital Group, who trades options on the S&P 500, says he will be watching this week to see if the S&P can take on the 1300 level.
At the same time, stocks will face some important data including Tuesday's manufacturing data, Wednesday's factory orders, and Friday's jobs report.
"Every time we traded the near 1300 mark, we collapsed... Tuesday and Wednesday are going to tell us a lot," said Prskalo. The S&P 500 finished last week at 1282.
The U.S. dollar was stronger in Monday's trading as the British pound fell to its lowest level since April, 2006. The U.K. Chancellor of the Exchequer said the economic environment is the most difficult in 60 years.
Stocks in the News
In other news, the Wall Street Journal reports that Google plans to launch a web browser, called Google Chrome.
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