Oil Stocks On A Low; Financial Losses On A High

Except for the one silver lining in the sky in the fall of oil prices which bucked up some investors, trading in Wall Street saw its ups and downs as restrained news from the financial sector raised more questions about the economy’s health. That there was trouble was ramified by the news that hit the street that JPMorgan had lost more in the third qtr. than in the second in its mortgage holdings. Lowering of ratings and estimates of earnings by several analysts brought down Goldman Sachs Group also.

Fluctuation in oil prices

Fluctuation in oil prices and news of financials saw a see-saw trading effect. Dow Jones industrials went up by some 3.1% or more than 350 points in the last two sessions directly attributable to decline in oil prices. Meanwhile, the problems faced by financials brought down Blue chips by more than 120 points till the Dow was later on propped up by the fall in oil.

Trading in oil was in turmoil on Tuesday because of different factors. Whether global demand for oil was rising or falling was a matter of speculation and this speculation reflected on the trading trends. To add fuel to the fire, there was a bit of news going around that BP Plc had closed down an oil line running through Georgia for safety’s sake because of the ongoing rift between Russia and Georgian troops. The net result is that oil has fallen by about some $30 and more since its high of $147.27in July. Oil now stands at $112.68 having fallen by $1.77 on the New York Mercantile Exchange. This has kept inflation slightly at bay.

Snowballing

According to the Chief Equity Market Strategist at Federated Investors, some of the big financial services that influence the future of trading are snowballing what is happening on the market. But occasional layoffs are expected because of the down trend in oil prices since last month. Morning’s trading saw the Dow fall by 80.11, or 0.68% to 11,702.24. Gold prices were tumbling and the dollar was gaining against other currencies.

Meanwhile instead of an expected growth, the country’s trade deficit shrank in June according to a report originating from the Commerce Department. It dropped to $56.80 billion in June, a drop of 4.10%, against a revised deficit of $59.20 billion in May. This was not only the smallest deficit in three months but also better than the $61.50 billion Wall Street had predicted.

Fresh signs of the impending troubles in the credit markets surfaced due to the mandatory filing of its balance sheets by JPMorgan showing a loss of $1.50 billion in its mortgage supported securities and loans during the quarter. The company’s losses directly related to bad mortgage debts alone came to $1.10 billion during the second quarter. The only flip side to the loss was that it was meager compared to the $300 billion that went down the drain, for financial institutions, over the past one year.

In addition to the losses suffered by JPMorgan, Wachovia Corp went down by $1.72 (9.50%) to stand at $16.49 consequent on its disclosure of plans to lay-off more that 600 jobs than it previous estimate, in its attempt to cut costs to offset the mortgage backed debt losses. The bank also disclosed that its legal reserves had gone down by $500 million in its mandatory filing for the last quarter. This was in relation to its talks with regulators concerning auction-rate securities.

The volume of share trading came to 36.30 million in the N.Y Stock Exchange with declining issues outnumbering advancers 3:2. The Russell 2000 Index, a subset of the Russell 3000® Index, measuring the performance of the small cap segment rose by 1.14% to close at 756.19 on 2008/08/14 at 20:50 ET from its opening of 744.46.