Energy Saves Stocks From a Sharp Retreat but Markets Remain Off Balance

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A surge in crude oil prices, and energy names, kept markets from a sharp retreat from records notched a day earlier.

The Dow Jones Industrial Average was flat, the S&P 500 fell 0.02%, and the Nasdaq dropped 0.08%. 

The Dow, S&P 500 and Nasdaq scored new records on Tuesday, Sept. 12, as the promise of tax reform fueled gains in the financials sector. The Dow finished at a new high by less than a point, while the S&P 500 ended at an all-time record high for the second day in a row. 

Signs of reduced global production sparked a rally in crude oil on Wednesday. Global oil supplies have hit a snag in recent weeks as Hurricane Harvey limited output in the U.S. and declining activity in the Middle East helped the Organization of Petroleum Exporting Countries keep to its previous deal to limit production.

Global oil supply fell by 720,000 barrels a day in August to 97.7 million barrels a day, the first drop in four months, the International Energy Agency said in its monthly report. Production among the Organization of the Petroleum Exporting Countries fell from its 2017 peak in July as the bloc took efforts to comply with its previous agreement. A monthly report from the cartel on Tuesday showed that production had fallen, largely attributed to output declines in Iraq, Libya, Gabon and Venezuela.

However, crude stockpiles in the U.S. have ballooned recently as Harvey crippled refinery production in the Texas and Louisiana region. U.S. supplies increased by 5.9 million barrels in the past week, the Energy Information Administration reported Wednesday morning, higher than consensus of 3.2 million. Gasoline and distillates stocks fell. 

West Texas Intermediate crude was up 1% to $48.71 a barrel on Wednesday morning.

Major oil producers were mostly higher on Wednesday morning, including Exxon Mobil Corp. (XOM) , Royal Dutch Shell PLC (RDS.A) , Chevron Corp. (CVX) , BP PLC (BP) and Statoil ASA (STO) . The Energy Select Sector SPDR ETF (XLE) was up nearly 1%.

Apple Inc. (AAPL) declined more than 1% as questions rose over the timing of the iPhone X. Sales of the new anniversary iPhone edition, the company said, will likely begin in early November, well in time for the peak of the U.S. holiday shopping season but still likely to push a good portion of the phone’s revenue into the December to March quarter, the second of the company’s next financial year. The later release could potentially hinder sales of the new iPhone 8, which will be available later this month. 

Apple unveiled its highly anticipated iPhone 8, 8 Plus and iPhone X models during a press event on Tuesday afternoon. The iPhone 8 has a steel-reinforced glass design and stronger material to prevent cracks in what Apple calls its “most durable ever.”  The buzzier iPhone X relies on face ID for access to the phone instead of touch ID in current models and carries a $1,000 price tag.

Republicans’ tax plan has a date of release: Sept. 25. In a weekly press briefing, House Speaker Paul Ryan said an “outline” will be made public in just under two weeks and that the House Ways and Means Committee and the Senate Finance Committee would then have a chance to revise and draft up a bill. President Donald Trump has touted his tax plan in recent speeches, though details have been scant. 

U.S. producer prices increased at a slower pace than anticipated in August with a large bulk of the rise attributed to higher gas prices. The producer price index rose by 0.2% in August, according to the Bureau of Labor Statistics, weaker than an anticipated 0.3% increase. Core prices, excluding food and energy, gained 0.2%. Core prices rose 1.9% over the past 12 months. Consumer prices will be released on Thursday, Sept. 14.  

Inflation numbers out this week could give the Federal Reserve pause, particularly if the figures show a more long-lasting trend of softness. Recent weak readings on inflation have been characterized by Fed members as “transitory.” Producer and consumer prices for August will factor into the Fed’s next policy decision. The Federal Open Market Committee, the decision-making branch of the central bank, is set to meet for two days beginning on Tuesday, Sept. 19. An announcement and updated forecasts will be released on Wednesday, Sept. 20, followed by press comments from Fed Chair Janet Yellen.

Nordstrom Inc. (JWN) shares jumped more than 5% on Wednesday following a report that said family members, who are executives of the department store, were nearing an agreement with private-equity firm Leonard Green & Partners to assist in a buyout of the retail giant. As part of the agreement, Leonard Green would give the Nordstrom family members, who own roughly 31.2% of the company, about $1 billion in equity to help fund the transition, CNBC reported. The deal with Leonard Green hasn’t been finalized, and other parties may still emerge and begin their own discussions. 

Nordstrom stated its intentions in June to go private and has been searching for a private-equity backer to support a transaction. It has previously held discussions with both Apollo Global Management LLC and KKR & Co.

Fellow department store chains rallied alongside Nordstrom. J.C. Penney Co. Inc. (JCP) , Dillard’s Inc. (DDS) , Macy’s Inc. (M) , Kohl’s Corp. (KSS) , and Sears Holdings Corp. (SHLD) were all higher on Wednesday morning. The S&P Retail SPDR ETF (XRT) added 1%. 

Finish Line Inc. (FINL) jumped on Wednesday after Susquehanna Financial upgraded its rating on the belief the company could be bought out. Susquehanna analyst Sam Poser upgraded his rating to positive from neutral and raised his price target to $12 from $9. Poser believes there is a 75% chance the athletic footwear chain will be bought out by Sports Direct.  

Updated from 9:33 a.m. ET, Sept. 13. 

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