Blog Post

Stocks Fall Over Fear of New Variant

Dear Erik,

Stocks sold off sharply on Friday as a new variant of the Covid virus, much more mutated than previous variants, was discovered in South Africa prompting travel restrictions throughout the world.  For the week, stock indices ended significantly lower.

The U.S., in coordination with China, India, Japan, South Korea and the U.K., announced a coordinated release of oil reserves to combat higher gasoline prices which have been driving consumer inflation.  As OPEC+ had committed to raising production by a modest 400,000 barrels each month, demand has been increasing much more quickly than supply.  The U.S. contributed the largest amount, 30MM barrels from the 605MM barrel in the strategic petroleum (SPR) reserve.  It remains to be seen how much and for how long the release will affect retail prices.  However, OPEC+ may suspend their planned increases in the near future due to the release.

The SPR was originally created to counter severe supply interruption in the wake of the 1973 energy crisis.  However, this has changed since the U.S. became able to supply it’s needs and in November of 2019 the U.S. became a net exporter of oil.  In 2021, the U.S. became the world’s largest producer of oil.  In 2015 Congress required the drawdown of the SPR to help fund the deficit.  Hence, the SPR has gone from full capacity in 2010 of 714MM barrels to 605MM barrels prior to this release.

The Federal Reserve released minutes from their last meeting where they decided to reduce bond purchases by $15BN each month.  Some officials expressed concern that the pace may need to be accelerated to combat inflation.

Treasury yields fell with the 30-year bond yield closing at 1.829% and the 10-Year note closing at 1.479%.  Crude oil fell to $68.17 a barrel and natural gas rose to $5.498 per MMBTUs.  The U.S. dollar index was unchanged at 96.07 and gold fell to $1792.30 an ounce.

In the economic numbers:

  • The National Association of Realtors reported that existing home sales rose 0.8% in October from September but were down 5.8% from last October due to short supply.
    • The median home sale price has risen 13.1% from last October to $353,900.  
  • The U.S. Commerce Department reported:
    • Durable goods orders fell 0.5% in October as manufacturers struggle with labor and parts shortages and higher material and shipping costs.  This follows a 0.4% decrease in September.
      • From a year earlier durable goods orders have risen 22.1% in October.
      • Nondefense capital goods orders excluding aircraft rose 0.6% in October.
    • Consumer spending rose 1.3% in October.
  • The Labor Department reported:
    • First time claims for unemployment fell sharply to 199,000 the lowest since 1969 down from a revised 270,000 in the prior week.
    • The 4-week moving average of claims, designed to smooth out volatility, fell to 273,250.
    • Continuing claims fell from 2.1MM to 2.0MM in the week ending November 13th
    • A broader measure of claims including extended benefits, pandemic assistance and other programs fell from 3.1MM to 2.4MM in the week ended November 6th.
    • For the full unemployment report go here: .
  • The EIA weekly oil report is here: .  Also, the EIA reported in the prior week:
    • Field production of crude oil rose from 11.4MM to 11.5MM BPD.
    • Natural gas storage fell 21BN cubic feet and is slightly below the 5-year average at this time of year.
  • Baker Hughes reported the number of active oil rigs rose 6 to 467.  The number of active natural gas rigs was unchanged at 102.

Please call us if you have any questions.

Loren C. Rex, CFP®, MA                                                                     Erik A Smith, AIF®

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Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC.  Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor.  Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.

 These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.  The Indices mentioned are unmanaged and cannot be invested into directly.


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