Stocks started May on a softer footing, in a day of mixed signals from markets.
The killing of terror mastermind Osama Bin Laden by U.S. troops in years past would have sent the stock market rallying, but the response Monday to his death was subdued, in financial markets at least, and stocks erased an early gain.
The Dow slipped 3 Monday to 12,807, and the S&P 500 was off 2 at 1361.
"I think the market was overbought, and I was looking to see if the first day of the month went to the upside, and the fact that we had Osama Bin Laden dead might outweigh the overbought condition. But the Dow has been up 700 points since March 18," said Art Cashin, director of floor operations at UBS.
"It's my recollection that it looks a lot like what happened when they caught Saddam Hussein. It rallied at first, and then gave it up," said Cashin. There was a point years ago, when the demise of Bin Laden might have been celebrated with a several hundred point rally.
"Things are different now. Al Qaeda is not run like a monolithic operation," Cashin said.
When news of the killing by U.S. troops broke Sunday evening, stock futures burst higher, the dollar rallied and oil and metals saw selling. But that reversed during the trading day, and the dollar was lower against the euro and oil recovered most of its losses. Oil ended the day at $113.52 per barrel, down $0.41.
"I was not surprised the (oil) market did not stay down for long. I just think there's very little connection between Osama Bin Laden and the oil market at this time. When you look at the influences that are driving oil prices — the dollar, the unrest in the oil production region and the stronger economy globally," said Ray Carbone, president of Paramount Options.
"Ten years ago, Osama Bin Laden would have moved oil a lot more," said Carbone. Crude moved to its lows in thin overnight volume. "Once the volume hit the market it was a one way direction, really."
University of Maryland Professor Shibley Telhami said the Bin Laden killing comes at a time when the terrorist leader would have been at odds with the philosophy that sparked the Arab spring peace demonstrations. "He would have looked at them as something that went against his message," said Telhami, who holds the Anwar Sadat Chair at the university.
But another concern was not lost on markets, especially the oil market. "Among his core supporters, this is going to be a defiance moment to register they're still in business. This could be a dangerous moment," he said.
What to Watch
April car salesare the big item for Tuesday's markets, as traders also start to look forward to the monthly jobs data the end of the week. There is also factory orders data, reported at 10 a.m. Earnings are expected from Pfizer , Archer-Daniels, Avon, MasterCard , Marathon and Tenet Healthcare, before the bell. Comcast , CNBC's parent, Green Mountain Coffee, CBS and McKesson report after the bell.
There is also API oil and gasoline inventory after the bell, ahead of Wednesday's EIA inventory data. As gasoline prices head to $4 a gallon, weekly gasoline inventories have been on the decline.
"What's making prices higher is the loss of the better refinable crude oil, and that's why the gasoline market has been so strong. You get less out of the barrel from that sour crude that's replaced the Libyan crude. That's putting upward pressure on the gasoline market," said Carbone.
He also noted a distinction between now and the summer of 2008 when gasoline prices were last this high. "We got the high prices at the end of the summer driving season and we saw demand plummet. If demand is going to get destroyed, it will not be so easy in the driving season. That's why you don't see the inventory builds in gasoline," he said.
The dollar was weak once more Monday, as the euro continued to gain. The euro was at 1.4831 late in the day, after rising above 1.49.
Boris Schlossberg of GFT Forex said he will be watching the Australian central bank's overnight to see if it indicates further rate hikes. Traders are especially watching Thursday's meeting of the European Central Bank, for a signal of whether the ECB will hike again in June or July.
"One thing from a geopolitical point of view is what happens to oil. Higher oil prices are positive for the risk trade, lower prices are positive for the dollar. We need to see oil break below $110," said Schlossberg.
He also said another focus is the talk that Europe's weakest sovereigns could see debt durations extended, without writedowns. "...Europe is not kicking the can down the road, but they're kicking the can into the next century," he said.
As the dollar slumped, gold and silver also fell. Gold was off 2 percent, but silver fell 4 percent in its biggest one day loss in seven weeks. Silver had been down more than 10 percent Sunday evening, ahead of the Bin Laden news, as news of higher margins for the metal Friday sent speculators scurrying. The trend continued Monday, and after Monday's bell, the CME raised margins once more.
"It's poor man's gold, with rich man's margins," said Schlossberg.
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