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US stocks ended flat after oil prices fall on output fears

Last updated: 16:35 10 Jan 2017 EST, First published: 03:35 10 Jan 2017 EST

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US stocks ended Tuesday right back where they started, as falling oil prices and forecasts of heightened American fuel output this year, wiped out initial gains on the bourse.

The US government’s own Energy Information Administration forecast that oil output from the world’s biggest economy will increase 1.3% to 9mln barrels per day in 2017, abandoning an earlier prediction of a 0.9% fall.

In the first forecast for 2018 in its monthly Short-Term Energy Outlook, the statistical agency said US crude production will rise another 3.3%, or 300,000 barrels a day, to 9.3mln b/d. Production hit bottom last September, EIA said.

US oil production has turned a corner after a long period of weak petroleum prices, the government said, with volumes rising for the first time since early 2015.

But with the West Texas Intermediate dropping 2.3% to $50.79 the bourse also sagged.

The S&P 500 market bellwether ended flat at 2268, while the Dow Jones Industrial Average closed down 0.2% at 19,855.

Among stocks falling were energy stocks Halliburton Company (NYSE:HAL) down 2.3% to $54.78, World Fuel Services Corp (NYSE:INT) down 2.2% to $44.48, Oil States International (NYSE:OIS) down 1.9% to $39.70, and Sm Energy Company (NYSE:SM) down 1.8% to $33.86.

Only the tech-heavy Nasdaq Composite gave investors anything to cheer about. The index closed up 0.4% at 5551 having earlier market a fresh intraday high of 5,564.25.

The S&P Midcap 400 closed up 0.7% at 1681 and led by Allscripts Healthcare (NASDAQ:MDRX) up 9.4% at $11.79.

The S&P Smallcap 600 closed up 0.9% to 840 and led by Olympic Steel Inc (NASDAQ:ZEUS) up 11.6% to $27.40.


Early trading

US share recovered after opening weaker, while the Nasdaq Composite put in another record high on Tuesday, with healthcare stocks boosting tickers.

The Nasdaq Composite jumped 0.6% to a new historic high of 5,564.25, while the Dow Jones Industrial Average continued to flirt with the 20,000 level, rising 0.3% to 19,953. Meanwhile, the S&P 500 was up 0.3% to 2,276 — with industrials clocking the biggest gains and offsetting the decline in the real estate sector.

Although some investors have questioned whether the equities rally since the November election which saw a surprise victory for President-elect Donald Trump was overdone and whether the best of the gains are now priced in. But on Tuesday a business confidence survey turned in its best reading in 12 years.

The S&P 500 top gainer was healthcare tech group Illumina Inc (NASDAQ:ILMN) up 16.9% to $165.40. IBM-owned (NYSE:IBM) IBM Watson Health and San Diego-based genome sequencing firm Illumina ILMN have inked a partnership to achieve better interpretation of genome data through the integration of Watson for Genomics with Illumina’s tumor sequencing protocol and the BaseSpace Sequence Hub.

The S&P Midcap 400 was up 0.9% to 1684 and led by Allscripts Healthcare (NASDAQ:MDRX) up 9.7% to $11.82 after the company provided a bullish update on bookings alongside providing a number of financial updates on fourth quarter 2016. The company expects record bookings exceeding $400 million annual growth of over 17%. The company also affirmed its financial guidance for the fourth quarter and issued an initial financial guidance for 2017.

The S&P Smallcap 600 was up 0.9% to 840 and led by Olympic Steel Inc (NASDAQ:ZEUS) up 9.5% to $26.90.


Pre-Open

US stocks are seen opening lower on Tuesday, while the Nasdaq could outperform if it opens flat – setting itself up for a possible fresh record high - unless a wholesale rally follows if investors buy into the latest 12-year high business optimism index print.

But also keep an eye on when the 10-year US Treasury note yield hits 2.6% - it is widely viewed as the curtain-raiser on a bond bear market, boosting the allure of equities as an alternative investment.

The tech-heavy Nasdaq Composite managed to scale an intraday record high of 5,541.08 before closing up 0.2% at 5531 on Monday.

The S&P 500 market bellwether is indicated opening down 0.03% and the Dow Jones Industrial Average will ebb yet further away from breaching 20,000 and open down 0.1%.

The NFIB Business Optimism Index in the United States recorded a whopping gain to 105.8 in December, well above a forecast 99.6 and way over November’s 98.4 reading.

The number is at its highest since about 2005. The last time the index touched 100 was at the start of 2015.

It demonstrates ongoing confidence among business leaders about the looming presidency of Donald Trump, which begins on Jan. 20. On Tuesday, outgoing US President Barack Obama will deliver his farewell address.

For those, like this author, who are tiring for a frustrated and elusive path by the Dow to the 20,000, one influential pundit is saying forget tracking the Dow. The number to watch closely is 2.6% yield on the 10-year Treasury note, says Bill Gross and whether it will rise. Since 1987 the trajectory of the 10-year T-Note yield has been ever lower as a bond bull market ensued. But with rates on the up and prospects of a reflationary and possibly inflationary presidency ahead, yields are expected to rise.

The Janus portfolio manager, dubbed the “Bond King”, warned that if the 10-year yield crosses that threshold, it will signal the start of a “a secular bear bond market”.

The yield shot up from about 1.8% prior to the election of Donald Trump in November, to as high as 2.6% the following month. It has since receded to roughly 2.4%.

Automaker stocks could be in for some price gyrations on Tuesday, as top global automotives make announcements at the Detroit auto show.

General Motors (NYSE:GM) CEO Mary Barra will be presenting details on her expectations for the company and sector.

The industry has been put on the defensive by president-elect Donald Trump, who has threatened GM, Ford (NYSE:F) and Toyota (NYSE:TM) with tariffs on cars imported from Mexico. Ford shares were up 0.2% at $12.65 pre-market.

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