Oil Smacking Stocks Around—Again

With the nonfarm payroll report over, stocks are back to getting smacked around by oil. Stocks weakened as oil moved toward $104, then recovered when it fell back, then weakened when oil moved up again...all in the last hour. Get it?

JPMorgan's Thomas Lee made a good point this morning: each $20 rise in oil, he estimates, reduces S&P earnings by $2.22. Consensus for 2011 earnings on the S&P 500 is about $95, so we are talking about a decline of 2 percent in earnings with just the $20 rise in oil we have seen in the past two weeks. That is not insignificant.

The Egyptian stock market is supposed to open this Sunday; it has been closed for a month. We'll see.

There have been significant outflows of money from the Middle East recently; Saudi Arabia, the largest stock market in the Middle East, has declined 15 percent in the last week. Traders believe much of the money pulled out has found its way into the U.S. markets and this is a factor in the recent U.S. market strength. There may be some concern that re-opening the Egyptian market will result in further capital flight from that region.

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