Market Swings Lower On Pressure From Falling Oil Prices

Stocks slid in early trading Wednesday, following the lead of overseas markets, after Saudi Arabia said no to oil production cuts, sending oil prices back toward the psychologically important $30 level. The question is whether the S&P 500 (SPX) can close above technical and psychological support at 1900. Futures fell below that level early Wednesday.

The stock market has been closely tied to oil for weeks, and rose earlier this week on hope that oil-producing nations would freeze or even cut production, which could trim the heavy supply overhang that sent oil prices to 12-year lows earlier this month. But Saudi Arabia’s oil minister said Tuesday that his country won’t reduce crude production. U.S. oil futures, which had approached $34 earlier this week on forecasts for falling U.S. production, recently were down more than 3% at $30.80.

The weak stock action is driving investors into other markets, with U.S. 10-year Treasury note yields falling to around 1.7% early Wednesday, down from 1.8% a week ago. Gold prices rose 1% early Wednesday.

Overseas, a lower Chinese currency weighed on markets. Many industry analysts see the falling Chinese yuan as an indication of weakness in the Chinese economy.

U.S. new home sales data will be released at 10 a.m. ET today. Richmond Fed President Jeffrey Lacker will be speaking today at 8 a.m. ET, and St. Louis Fed President James Bullard will speak after the closing bell at 7.00 p.m. ET. Last week, Bullard said it would be “unwise” to raise rates further.

Shares of retailer Target Corporation TGT fell early Wednesday after the company reported quarterly earnings and sales below expectations.

Natural Gas Nears Recent Lows: Almost lost amid the turbulent oil prices was a drop in New York Mercantile Exchange (NYMEX) front-month natural gas futures Tuesday to their lowest daily settlement in more than two months at $1.78 per 1 million British thermal units. A settlement below $1.755 would be the lowest for a front-month contract since early 1999. The commodity is under pressure from warm winter weather that’s reduced demand. Supplies climbed last week to more than 24% above a year ago and 26% above the five-year average, according to the U.S. Energy Information Administration (EIA).

Pound is Sinking These Days: The British pound has been slumping ahead of a U.K. referendum scheduled for late June on whether Britain should remain in the European Union. At one point Tuesday, the pound fell to its lowest level since March 2009. The pound has lost more than 17% against the dollar since peaking above $1.70 in July 2014, and recently traded at around $1.40.