While you were sleeping: Goldman Sachs down on oil

Tuesday 13th January 2015

Wall Street fell, with shares of Exxon Mobil and Chevron leading a drop in the Dow, after analysts at Goldman Sachs cut their outlook for oil prices.

Goldman analysts downgraded their three month forecasts for Brent to US$42 a barrel, from US$80 and for West Texas Intermediate to US$41, from US$70. Societe Generale analysts also slashed their oil price estimates.

Unsurprisingly, oil prices dropped, with WTI for February delivery down 4 percent to US$46.41 a barrel in New York and Brent for February settlement 5.3 percent weaker at US$47.48 a barrel in London.

“The price forecast cuts by both Goldman and Societe Generale reinforce the fears that have driven us down to these levels,” Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut, told Bloomberg News. “We’re hunting for a bottom, but it’s anyone’s guess where that will be.”

In afternoon trading in New York, the Dow Jones Industrial Average fell 0.54 percent, the Standard & Poor’s 500 Index slid 0.90 percent, while the Nasdaq Composite Index declined 0.93 percent.

Declines in shares of Exxon Mobil and those of Chevron, down 2.3 percent and 1.9 percent respectively, led the Dow lower.

Alcoa unofficially kicks off the fourth quarter earnings season after the market close with investors apprehensive amid the plunge in oil and the strength of the US dollar.

"People are truly becoming concerned about global growth stories here," Keith Bliss, senior vice president at Cuttone & Co in New York, told Reuters. "People are getting a little bit ahead of this selloff in anticipation of fourth quarter earnings announcements and more worry about the large multinationals and what they are going to say about demand globally, as well as the impact of the [US] dollar."

Shares of Tiffany plunged 15.2 percent after the luxury jeweller slashed its full year profit forecast, citing disappointing sales in the holiday shopping season.

"Clearly, sales for the holiday period were disappointing overall, with significant variability in performance by region and by product category,” Michael Kowalski, Tiffany’s chief executive officer, said in a statement. “Our very strong and concentrated marketing focus on Tiffany "T" generated strong sales growth in fashion gold jewelry. However, that success did not translate into broader sales momentum as we had anticipated in other jewelry categories.”

US Federal Reserve Bank of Atlanta President Dennis Lockhart suggested US policy makers take a “cautious and conservative” approach towards raising interest rates.

“If the early months of this year bring mixed news on the economy, the risk manager in me will lean to preferring a later date for the first policy move to an earlier one,” Lockhart said in a speech in Atlanta. “I supported and expect to continue to support a patient approach, one that is relatively cautious and conservative as regards the pace of normalisation of rates.”

In Europe, the Stoxx 600 Index finished the day with a 0.6 percent gain from the previous close. France’s CAC 40 Index rose 1.2 percent, while Germany’s DAX Index added 1.4 percent. The UK’s FTSE 100 Index barely budged from the previous close.

BusinessDesk.co.nz

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