Financial markets slipped as corporate earnings results disappointed and Fed’s Beige Book showed that the US economy only expanded modestly. Wall Street fell with the DJIA and the S&P 500 losing -0.95% and -0.62% respectively. In the commodity sector, Brent crude steadied but WTI crude plummeted after initially soaring to a 3-week high as sentiment dampened by the OPEC’s downgrade of oil demand. The front-month contract for WTI crude oil slid -1.23% to settle at 91.25. Prices were also hit by the higher-than-expected increase in US oil inventory last week.
Market performance would be more reactive to corporate announcements as the earning season began. Chevron said that its profits would be “substantially lower” in 3Q12 while Alcoa reported a quarterly loss. Attributed to Chinese slowdown, Alcoa downgraded its 2012 global aluminum demand forecast to 6%, down from 7%. These were despite positive comments from Walmart. Walmart announced plans to add new stores and projected that sales would grow both this year and in 2013.
The Fed’s September Beige Book indicatedthat the US economy 'expanded modestly', compared with the reference 'expanded gradually' used in the August report. While most districts showed modest growth, the New York District had 'a leveling off' in economic activity and Kansas City showed 'some slowing in the pace of growth'. Overall, improvement was seen in the housing market and the automobile sector. Consumption was 'generally flat to up slightly' while the manufacturing sector was 'somewhat improved'. The report appeared to be inline with Fed Chairman Ben Bernanke’s earlier comments that the pace of economic growth is insufficient to bring the employment conditions back to normal.
On the oil sector, the OPEC said in the monthly report that its forecast on world oil demand would increased +0.78M bpd in 2013, down -0.03M bpd from previous forecast with risks skewing to the downside. Concerning US inventory, the industry-sponsored API estimated that crude stock increased +1.65 mmb in the week ended October 5. Gasoline also gained, adding +2.5 mmb, while distillate fell -6.2 mmb. The market anticipated that the official Doe/EIa report showed that crude inventory gained +1.5 mmb while distillate slipped -0.4 mmb. Gasoline stockpile probably stayed unchanged.
Oil and Gold Reports contributed by Oil N' Gold