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Sinking Copper Prices Spook Stock Investors

Published 03/11/2014, 03:11 PM
Updated 05/14/2017, 06:45 AM

Investors remained risk-averse on Tuesday, as sinking copper prices raised concerns about the health of the global economy. 

Investors remained risk-averse on Tuesday, as “Dr. Copper” offered an unpleasant diagnosis about the health of the global economy.  China’s economic slowdown caused the spot price of copper to sink another 3.01 percent on Tuesday to $2.95 per pound.  Copper prices began their decline on Friday, when the metal’s spot price took a 4.27 percent nosedive.

On the other hand, many investors see “Dr. Copper” as having retired and taken his practice to China.  Although the spot price of copper used to track the S&P 500, it has not done so in over a year.  Nevertheless, there has been recent correlation between the price of copper and the Shanghai Composite Index.

The Dow Jones Industrial Average (DIA) lost 67 points to finish Tuesday’s trading session at 16,351 for a 0.41 percent decline.  The S&P 500 (SPY) declined 0.51 percent to 1,867.

The Nasdaq 100 (QQQ) retreated by 0.40 percent to finish at 3,691.  The Russell 2000 (IWM) fell 1.12 percent to 1,187.

In other major markets, oil (USO) sank 1.35 percent to close at $35.81.

On London’s ICE Futures Europe Exchange, May futures for Brent crude oil declined 12 cents (0.11 percent) to $107.63/bbl. (BNO).

April gold futures advanced $7.20 (0.54 percent) to $1,348.80 per ounce (GLD).

The transportation sector had to change a tire during Tuesday’s trading session, as the Dow Jones Transportation Average declined 0.27 percent to 7,560 (IYT).

In Japan, the exchange rate for the yen was again the dominant factor in stock market activity.  Japanese stocks advanced as the yen weakened to 103.43 per dollar during Tuesday’s trading session in Tokyo.  A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY).  The Nikkei 225 Stock Average climbed 0.69 percent to 15,224 (EWJ).

In China, stocks advanced slightly as the nation’s money market rates declined.  The Shanghai Composite Index advanced 0.10 percent to 2,001 (FXI).  Hong Kong’s Hang Seng Index rose 0.02 percent to 22,269 (EWH).

Stocks remained unchanged in Europe as ongoing tension over Russia’s plans for Crimea kept European investors in a risk-averse mood.  The Euro STOXX 50 Index finished Tuesday’s session with a microscopic dip to 3092.55 from Monday’s close at 3,092.79 – remaining just a whisker above its 50-day moving average of 3,092.21.  Its Relative Strength Index is 48.08 (FEZ).

Technical indicators revealed that the S&P 500 remained above its 50-day moving average of 1,828 on Tuesday, after declining 0.51 percent to 1,867.  Its Relative Strength Index (RSI) declined from 65.92 to 60.68.  The MACD is dropping toward the signal line, suggesting that the S&P could continue its decline during the immediate future. 

On Tuesday, all sectors finished in the red.  The energy sector took the hardest hit, falling 1.13 percent.

Consumer Discretionary (XLY):  -0.58%

Technology:  (XLK):  -0.22%

Industrials (XLI):  -0.72%

Materials: (XLB):  -1.03%

Energy (XLE):  -1.13%

Financials: (XLF):  -0.67%

Utilities (XLU):  -0.28%

Health Care: (XLV):  -0.20%

Consumer Staples (XLP):  +0.05%

Bottom line:  Concerns about the health of the global economy – resulting from sinking copper prices and Russia’s ongoing Crimean adventure – sent stock prices lower on Tuesday.

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