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OPEC+ Announces Surprise Output Cut, Oil Prices Surge and NASDAQ Retreats

By:
James Hyerczyk
Published: Apr 3, 2023, 15:08 UTC

The stock market reacted mixed to the surprise output cut from OPEC+ as energy sector stocks surged while the Nasdaq Composite fell.

NASDAQ Composite

In this article:

Highlights

  • OPEC+ announces surprise output cut of 1.16 million barrels per day
  • Oil prices surge by 6% with analysts predicting a potential 20% increase
  • Energy sector stocks see gains of over 6%, while WWE stock drops by 7%
  • Tesla falls short of Q1 delivery expectations, dragging NASDAQ lower

Overview

The Nasdaq Composite retreated on Monday as oil prices surged, adding to the challenges faced by an already struggling economy that has been impacted by Federal Reserve rate hikes and instability in the banking sector.

At 14:00 GMT, the blue chip Dow Jones Industrial Average is trading 33574.17, up 300.02 or +0.90%. The benchmark S&P 500 Index is at 4117.58, up 8.27 or +0.20% and the tech-weighted NASDAQ Composite is trading 12166.60, down 55.31 or -0.45%.

Nonetheless, the Energy Select Sector SPDR fund (XLE) saw a 4% increase, with Marathon Oil and Halliburton being the top performers. Additionally, Chevron’s shares led the Dow higher, rising 3.9%.

With trading closed for Good Friday, the first week of the new quarter is shortened, but investors will be keeping an eye on key economic data, including job openings data on Tuesday, ADP private payrolls report on Wednesday, and the highly anticipated monthly jobs report on Friday.

Daily NASDAQ Composite Index

OPEC+ Surprises Market with Output Cut, Oil Prices Surge and Could Rise Up to 20%

The OPEC+ group has announced a surprise output cut of 1.16 million barrels per day, causing oil prices to surge. West Texas Intermediate crude rose by 6.6% and international benchmark Brent crude climbed by 6%.

Analysts are predicting that oil prices could rise by up to 20% as a result of this cut. The prospect of higher oil prices has led to fears of higher inflation and a looming recession.

However, some analysts believe that the momentum for global oil demand is up, particularly with China’s recovery, which could push prices even higher.

Goldman Sachs predicts that Brent prices could reach $95 per barrel for December 2023, up from its previous forecast of $90 per barrel.

Stocks on the Move Shortly after the Opening

Following an announcement by OPEC of a production cut, energy stocks saw a widespread increase in value. Marathon Oil, Halliburton, APA, and Occidental Petroleum all experienced gains of over 6%.

WWE stock decreased in value by 7% after completing a merger with Endeavor to create a new publicly traded company.

Extra Space Storage has announced plans to acquire Life Storage in a transaction consisting entirely of stock. The deal will result in the formation of a storage unit operator with an equity market cap of $36 billion and an enterprise value of $47 billion.

Sunnova Energy’s shares saw an increase of over 5% after Morgan Stanley initiated coverage of the stock with an overweight rating. The investment firm noted the potential for the stock to more than double in value.

Vulcan Materials received an upgrade from Goldman Sachs, which raised the rating from neutral to buy. The decision was made in light of a cooling inflation trend.

Macy’s shares experienced a 3.8% increase after being upgraded by JPMorgan from neutral to overweight. The investment firm expressed confidence in the retailer’s bottom-line plan.

SL Green Realty’s shares rose over 3% premarket after receiving an upgrade from BMO to outperform. The decision was made based on an oversold valuation and anticipated catalysts.

Tesla’s stock saw a 3.1% decrease in value after the company reported Q1 2023 deliveries of 422,875 vehicles, which fell short of Wall Street’s expectations.

Short-Term Outlook

The stock market is experiencing a mixed reaction to today’s OPEC news with the Nasdaq Composite retreating and the Dow Jones and S&P 500 Index trading higher.

In addition to the OPEC+ production cut, individual company news is also affecting stock prices. Money is flowing into the energy sector as evidenced by the jump in the Energy Select Sector SPDR fund (XLE). However, we could see pressure on the overall market later today because the surge in oil prices could potentially lead to fears of higher inflation and a looming recession.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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