Oil will be the lead story today as WTI crude is trading above the $105.00 level. It is still amazing that many talking heads in the financial media are discounting the effects of high energy prices. Please remember that U.S. consumer spending accounts for 70.0 percent of the gross domestic product (GDP) in the United States. GDP really has no choice but to be negatively effected going forward.
The problems in the Middle East, and North Africa, continue to escalate and show no signs of easing up anytime soon. Libya, Yemen, Egypt, and Bahrain, remain in turmoil. Many investors and traders are watching Saudi Arabia very closely. Should a disruption occur in Saudi Arabia, which is the largest producer of oil in the Middle East, a super spike in oil is possible. This morning the United States Oil Fund (NYSE:USO) is trading higher by 0.20 cents to $42.10 a share.
Euro-zone nations such as Ireland, Portugal, and Greece have bond yields surging this morning. Obviously, the European Central Bank will have to step in a buy more debt from these countries in order to bring the yields back down. This is exactly what the Federal Reserve does in the United States on a daily basis via it’s permanent open market operation (POMO). This morning the Currencyshares Euro Trust (NYSE:FXE) is declining sharply 0.70 cents to $140.80 a share. When the Euro declines it usually means that the U.S. Dollar Index is higher and that is the case this morning.
Asian markets were mixed overnight. The Nikkei Index(Japan) declined by 1.65 percent. The Shanghai Index(China) and the Sensex Index (India) were both higher by more than 1.00 percent. When the Shanghai Index trades higher traders should watch for leading commodity stocks to be in play at the open. Stock such as Freeport McMoRan Copper & Gold Inc. (NYSE:FCX), and Cliffs Natural Resources Inc. (NYSE:CLF) will trade trade higher before the opening bell at the New York Stock Exchange.
The major stock indexes have bounced sharply over the past week. Many leading stocks are now trading into important resistance levels, therefore, expect this market to be more volatile today.