What Will Happen to Stocks With Oil Below $40?

What Will Happen to Stocks With Oil Below $40? (this snippet from a recent article in the TheStreet …)
Oil prices dipped below $40 on Monday for the first time since April. If the commodity stays low, stocks are set to suffer, according to one analyst.

“I expect that if we dip below $40 sustainably, you will hear that drum beat of weaker global demand come back into play. But right now this seems to be supply-driven, with the reopening of the ports in Libya,” said David Lebovitz, global market strategist at JPMorgan Asset Management, based in New York. “If we begin to see fears around another global growth scare, it’s obviously going to be negative for risk assets.”

Lebovitz said the defensive and income areas of the stock market will continue to garner support, while some of the cyclical sectors, which have rallied since the June 23 Brexit vote, sell off slightly. Lebovitz said the recent slump in oil is supply-driven, not demand-driven.

Oil prices rebounded slightly on Tuesday, with West Texas Intermediate, the U.S. benchmark for oil, rising back about $40.

The closely watched commodity fell 12.8% over the past month, but it remains well above the $26-a-barrel price reached at the beginning of the year.

Lebovitz said it’s unclear where oil prices are going. Investors have been shrugging off the recent declines amid an improving earnings landscape, despite a weak GDP print, which showed an economy that grew 1.2%. Analysts had expected 2.6% growth.

“We understand why it was weak: we lost over a full percentage point given the draw down in inventories,” Lebovitz said. Other factors investors have been worried about, including China, seem to have stabilized, he added.

Oil prices dipped below $40 on Monday for the first time since April. If the commodity stays low, stocks are set to suffer, according to one analyst.

“I expect that if we dip below $40 sustainably, you will hear that drum beat of weaker global demand come back into play. But right now this seems to be supply-driven, with the reopening of the ports in Libya,” said David Lebovitz, global market strategist at JPMorgan Asset Management, based in New York. “If we begin to see fears around another global growth scare, it’s obviously going to be negative for risk assets.”

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Lebovitz said the defensive and income areas of the stock market will continue to garner support, while some of the cyclical sectors, which have rallied since the June 23 Brexit vote, sell off slightly. Lebovitz said the recent slump in oil is supply-driven, not demand-driven.

Oil prices rebounded slightly on Tuesday, with West Texas Intermediate, the U.S. benchmark for oil, rising back about $40.

The closely watched commodity fell 12.8% over the past month, but it remains well above the $26-a-barrel price reached at the beginning of the year.

Lebovitz said it’s unclear where oil prices are going. Investors have been shrugging off the recent declines amid an improving earnings landscape, despite a weak GDP print, which showed an economy that grew 1.2%. Analysts had expected 2.6% growth.

“We understand why it was weak: we lost over a full percentage point given the draw down in inventories,” Lebovitz said. Other factors investors have been worried about, including China, seem to have stabilized, he added.