Iraq and oil price fears may send investors scurrying
While the week also will feature some key earnings from companies like ketchup maker Heinz and a slew of economic reports, the turmoil in Iraq was expected to move into sharper focus.
Analysts said investors are worried that the violence would spill over to other countries in the Middle East and send crude prices skyrocketing at a time when tension has also been rising over Iran’s nuclear plans.
Surging energy costs hurt corporate profits and crimped consumer spending, which accounts for about two-thirds of US economic activity.
On Friday, US crude for April delivery jumped more than $2 (€1.68) amid Iraq concerns and after a suicide bomb attack at the Abqaiq oil facility in Saudi Arabia triggered supply worries.
On the New York Mercantile Exchange, April crude settled at $62.91 (€52.93) a barrel, up $2.37 (€1.99) for the day.
The Golden Mosque in Samarra, one of Shi’ite Islam’s holiest shrines, was destroyed by a bomb on Wednesday, setting off bloody sectarian reprisals.
For the week, the Dow Jones industrial average ended down 0.5%. T&he Nasdaq finished the week up 0.2%.
While the spike in crude prices pushed up the stocks of major energy companies like Exxon Mobil Corp, they kept a lid on the broader market. Recent top sector plays like the semiconductors have come under pressure, opening the door to more defensive plays in sectors like healthcare.
DA Davidson & Co chief strategist Frederic Dickson said: “I don’t see any major catalysts that would propel stocks on the upside. We have nervousness over the situation in Iraq, and I’m frankly concerned about reports out of Saudi Arabia.”
Among economic data set for release this week, the January new home sales report is due on Monday, while fourth-quarter preliminary GDP and January existing homes sales data will be out on Tuesday.
Princeton Financial Group president Andre Bakhos said: “Housing in general has been a driving force in the economy. If housing is dying, it’s the end of the line for what’s driven the economy.”
According to economists surveyed by Reuters, new home sales in January are expected to slip to a seasonally-adjusted annual rate of 1.260 million units from December’s 1.269 million units. The preliminary GDP report is expected to show the US economy grew at an annualised rate of 1.6%.
