Rally Stalls as Lower Oil Futures, Strengthening Dollar Weighs

Stocks were trading mostly lower in midday trade on Wednesday as investors cashed in on some post-Election Day gains, bringing a seven-day run in the Dow Jones Industrial Average to a quiet end. The financial sector was leading decliners among the eleven S&P 500 sectors, while technology shares continued to outperform and recoup last week’s heavy losses.

The strengthening dollar’s impact on U.S. multinationals also helped put the brakes on the rally with shares of large exporters down by more than 1%.

Shares opened lower after digesting below-consensus inflation and production data, neither of which dimmed expectations for the Federal Open Market Committee to hike rates next month.

Wholesale prices were unchanged in October but were down 0.2% excluding the volatile food and fuel segment. This compares to estimates for the nominal PPI to increase 0.3% and the core to rise by 0.2%.

Following was a small decline in capacity utilization in October to 75.3% from 75.4% while industrial production was unchanged, both missing expectations to stay unchanged at 75.4% and increase by 0.1%, respectively.

The morning’s remaining data included a gain in the Atlanta Fed business inflation expectations to 2.0%, and the November housing market index to remain unchanged at 63.

Oil futures were also weighing on stock prices this morning as rising inventory levels trimmed Tuesday’s impressive gains. Although prices spiked briefly after Russia’s Energy Minister voiced his support for production limits, futures quickly retreated to the session lows, leaving Brent crude and West Texas Intermediate both down by at least 1% from Tuesday.

Stocks of dry bulk shipping companies were again posting stellar gains as investors continued to pour into the segment following last week’s election. Expectations for increased fiscal stimulus to translate into economic growth has caused shares in the sector to defy gravity with Diana Containerships (DCIX) shares up 222% and Globus Maritime (GLBS) higher by 236%.

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