The U.S. Stock Market – 2016 Week 2

After the first week of trading in 2016, the U.S. Stock market was down significantly.

For review: After the first week of trading, the Dow Jones Industrial Average ( DJIA ) was down 6.2%; the S&P 500 was down 5.92%; and the NASDAQ was down 6.92%.

With the second week of stock trading completed, all three averages continued their downward trends. Since the year started, the Dow Jones Industrial Average lost 1,437 points.  On a percentage basis, the DJIA has lost 8.2% for 2016, through week 2.

The S&P 500 lost 163 points so far this year.  This is an 8% loss for 2016, through week 2.

The NASDAQ has lost 866 points so far this year.  This is a stunning loss of 17.3% for 2016, through week 2.

The market price for a barrel of oil fell below the $ 30.00/barrel level on Friday, January 15, 2016.

Equity markets in Asia and throughout the world are also down with notable losses in the China market.

Hedge Funds continue to sell stocks to pay individuals who are closing their accounts.

Saudi Arabia continues to sell over ten million barrels of oil each day.  Since there is a vast oversupply of oil in the world, the price of oil will continue downward.  While Saudi Arabia could raise the world price of oil by restricting their supply, this appears unlikely in the next six months.  The Saudis want to keep the price of oil low so small independent oil companies in the U.S. can be forced into bankruptcy.  Most of the small independent oil companies are losing money with each barrel sold, but they continue to produce oil at a loss to meet bank loans that were negotiated when oil was much higher in price.  As these small independents file for bankruptcy, some small U.S. banks who have loaned funds to these companies will approach bankruptcy.

The prices of both gold and silver are expected to rise sharply as fear continues to dominate world equity markets.

R. Van Conoley

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