Stocks Plunge, Oil Drops, Euro Weakening, Nat Gas Traders Bracing for Cold Temps

A steep plunge in U.S. equity markets is wreaking havoc on crude oil prices on Tuesday as hedge fund investors scramble to meet margin calls on their futures contract positions.

Stocks were under light pressure during the pre-market session when Target reported weaker-than-expected earnings for the previous quarter. The company also posted lighter-than-forecast same store sales, which is a key metric for retailers.

Shares of Target plunged 9.2 percent on the news. The bearishness quickly spread across the Retail Sector and into the broad-based markets, leading to steep losses in the major indices.

Sellers continued to pound technology stocks lower even after the so-called “FAANG” stocks hit bear market territory.

Oil Markets Plunge

After consolidating for nearly a week on the hopes of a production cut from OPEC and its allies, crude oil prices plunged over 6% to a fresh one-year low. There was no news per see according to traders. The selling may have been fueled by steep selling from hedge funds and money managers who were scrambling to meet margin calls from stock market losses.

Euro Feeling the Impact of Lower Stock Prices

The Euro is also under pressure on Tuesday after touching a two-week high earlier in the session. Directly influencing prices were a sell-off in the European stock markets and general concerns about Italian banks. Indirectly, sellers were driven to dump the Euro by the rising U.S. Dollar.

The U.S. Dollar is surging against a basket of currencies, especially the Euro because of safe-haven buying caused by the steep drop in U.S. equity prices. Money is coming out of stocks and it has to go somewhere. The usual areas of interest for investors looking for protection are U.S. Treasury Bonds, The U.S. Dollar and the Japanese Yen.

Euro Traders Watching Italian-German Bond Yield Spreads

This is a big event if you’re a Euro trader and it’s something you should be paying close attention to. According to reports the Italy-Germany 10-year bond yields spread is “blowing up”. The sharp rise in the spread is creating worries all over Europe and we’re witnessing fear spread across the Euro and bank stocks.

In other news, the chances of an ECB rate hike in 2019 are fading quickly. All of this is likely being fueled by growing fears over Italy which could really jam up the ECB’s plans to begin tightening next year.

Natural Gas – Latest Weather Outlook

Is the cold weather returning?

According to NatGasWeather, “A brief milder break will set up over the west-central US & Midwest late in the week, then advancing into the East early this weekend, easing national demand to near or slightly lighter than normal, but only for a couple days. “

“However, yet another weather system with rain, snow, & colder than normal temperatures will gain strength across the west-central US this weekend, advancing deep into the southern US. Cold air will then engulf the Great Lakes and East early next week with demand back to impressive early season levels as lows drop below freezing over much of the country besides the far western and southern US.”