Markets Worry About Everything This Morning–Especially Bank And Energy Stocks

I dare you to find something global financial markets aren’t worried about. And, moreover, many of the worries are re-enforcing each other today.

So, for example, we’ve got U.S. Trade Representative Robert E. Lighthizer, saying on Sunday TV the the 90 day trade truce is a hard deadline. No deals in 90 days and the Trump administration will move immediately to new tariffs, he implied.

If you ended last week worried about a slowdown in global economic growth, then you began the week even more worried.

Which, of course, means that you’re worried that OPEC’s agreement to cut 1.2 million barrels of production beginning in January won’t be enough to significantly cut into surpluses as a slowing global economy results in lower demand for oil.

Even the increasing odds that the Federal Reserve won’t raise interest rates as rapidly as once expected in 2019 isn’t providing any boost. First, there’s the fear that the Fed is now behind the curve and that a signal that the Fed will raise rates only 2 times in 2019 (instead of three) will actually be a disappointment to a U.S. stock market that has moved on to imagine just one interest rate increase in 2019.

And that’s crushing bank stocks again today. (Investors were looking forward to an increase in interest rates in 2019 to boost bank profits.) The Financial Select Sector SPDR ETF (XLF) was down 2.63% as of 12:0 p.m. New York time.

With energy stocks down 3.51% (for the Energy Select Sector SPDR ETF Dow Jones Industrial Average was off 1.67%. A relatively smaller drop in the Technology Select Sector SPDR ETF (XLK) or just 0.74% hasn’t been enough to keep the NASDAQ Composite–which has a big technology and banking component–out of the red with a drop of 0.71%.

U.S. crude oil benchmark West Texas Intermediate was down 2.11% to $51.50 a barrel. International benchmark Brent crud was off 1.51% to $60.74.

The U.S. dollar was up 0.57% against the Dollar Spot Index as the British pound took a beating (down 1.5%) on news that Prime Minister Theresa May had delayed a vote on her Brexit package without setting a new date for the vote.

The yield on the 10-year U.S. Treasury rose 1 basis point to 2.86%. The 2-year Treasury (at a yield of 2.72%) and the 5-year Treasury (at a yield of 2.71%) stayed in a mild inversion. (Bond market inversions, where yields on longer maturities fall below those on shorter maturities, spook financial markets since they’re seen as an indicator of a potential recession.)