3 Reasons Markets Were Up As Libya Conflict and Gold Took Center Stage
Markets closed down on Wall Street today: Dow +0.34%, S&P +0.02%, Nasdaq +0.15%, Oil +2.26%, Gold +2.46%.
On the commodities front, Oil (NYSE:USO) climbed to $84.12 a barrel. Precious metals were also up, with Gold (NYSE:GLD) climbing to $1,897.80 an ounce and Silver (NYSE:SLV) rising 3.15% to $43.81 an ounce.
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Today’s markets were down because:
1) Libya. As the six-month conflict began to rush quickly toward a conclusion late Sunday, the price of Brent crude began to fall as investors anticipated that Libyan supply, which has been cut off since April, may soon return. Libya, a member of OPEC, used to supply the world with 1.6 million barrels of oil per day before breaking out into civil war — nearly 2% of the global oil (NYSE:OIL) supply.
2) Euro bonds. Tempering this morning’s gains was news of German Chancellor Angela Merkel’s opposition to joint euro bonds. While many think the bonds would protect European economies against the sort of sovereign debt problems that have currently been responsible for so much widespread economic turmoil, the joint bonds would ultimately cost the German government billions of euros each year. As both the biggest and strongest economy in Europe, Germany’s borrowing costs are significantly lower than its neighbors, and estimated interest rates on euro bonds are 0.8% higher than those of German sovereign bonds.
3) Tech. Hewlett-Packard (NYSE:HPQ) continued climbing off its news last week that it would be divesting itself of its hardware business and focusing on software. The stock rose 3.64% today, leading the technology sector to outperform all of the major indices. EMC Corp. (NYSE:EMC), Google (NASDAQ:GOOG), Nokia (NYSE:NOK), IBM (NYSE:IBM), Intel (NASDAQ:INTC), and Oracle (NASDAQ:ORCL) all made significant gains, buoying markets as financial stocks rapidly declined, led by Bank of America (NYSE:BAC) and Goldman Sachs (NYSE:GS). But not all technology sector components gained, with Microsoft (NASDAQ:MSFT), Cisco (NASDAQ:CSCO), and Baidu (NASDAQ:BIDU) keeping the sector to a moderate 0.53% rally today.