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Dow Suffers Second Straight Triple-Digit Drop as Oil Soars

Oil nears a nine-month high amid unrest in the Middle East

by 6/12/2014 4:19:32 PM
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"The weakness that began yesterday continued into the open this morning, and we experienced a steady dose of selling throughout the day," noted Schaeffer's Senior Equity Analyst Joe Bell, CMT. "On the heels of this morning's worse-than-expected retail sales report, many discretionary stocks took a hit." Against this backdrop, the Dow Jones Industrial Average (DJI) suffered its second straight triple-digit decline, giving up close to 110 points.

Continue reading for more on today's market, including:

  • 3 oil stocks to watch now, as oil futures trade above $106 per barrel.
  • Short-term Microsoft Corporation (NASDAQ:MSFT) options were in high demand today, but traders were split on the stock's next move.
  • In case you missed it, Schaeffer's contributor Adam Warner offers a lesson in realized and implied volatility -- and how it can help your trading.
  • Plus ... Tensions flare in the Middle East, retail sales disappoint, and Tesla Motors Inc (NASDAQ:TSLA) speculators took the bullish route.
Trading Topic of the Week -- Tips for Short-Term Trading: Select your option carefully. Consider your risk appetite and forecast for the stock when choosing a strike and expiration date, since there's no room for error when your trading time frame can be measured in hours.

The Dow Jones Industrial Average (DJI - 16,734.19) spent the session south of the flat line, closing with a loss of nearly 110 points, or 0.7%. Just five blue chips managed to dodge the red, led by oil concern Chevron Corporation's (NYSE:CVX) 0.7% advance. Caterpillar Inc. (NYSE:CAT) paced the declining majority, giving up 1.9%.

The S&P 500 Index (SPX - 1,930.11) also blazed a trail lower throughout the session, surrendering 13.8 points, or 0.7%, to end beneath its 10-day moving average for the first time since May 20. The Nasdaq Composite (COMP - 4,297.63) followed suit, shedding 34.3 points, or 0.8%, though its intraday losses were contained by support at its own 10-day trendline.

The CBOE Volatility Index (VIX - 12.56) jumped 1 point, or 8.3%, bringing its week-to-date gain to 17.1%. However, the "fear barometer" is still poised to end the week south of its 10-week moving average, which has been toppled on a weekly closing basis just once since mid-March.



A Trader's Take:

"The ongoing situation in Iraq continues to send oil prices and energy-related stocks higher," added Bell. "With their strength, it's no surprise to see the airline sector struggling the past few days."

5 Items on Our Radar Today:

  1. Iraq was back on the radar, as armed militants in a radical Sunni Muslim group set their sights on capturing major regions of the country. In response, Kurdish fighters have mobilized to thwart these advances, and easily seized the city of Kirkuk. (The Washington Post)
  2. May retail sales came in south of economists' estimates, as demand slipped for electronics, food, apparel, and sporting goods. Still, the reading ticked 0.3% higher, thanks to rising sales of autos and building supplies. Also, April's retail sales gain was adjusted higher to 0.5%, from the previously reported 0.1%. (USA Today)
  3. U.S. business inventories rose by a better-than-expected 0.6% in April after a 0.4% pop in March. In fact, it was the measure's sharpest increase since October. (Reuters)
  4. Options players pounced on Tesla Motors Inc (NASDAQ:TSLA), as rumors swirled over patents and new plants.
  5. As Chipotle Mexican Grill, Inc. (NYSE:CMG) continues to surge up the charts, Raymond James upped its price target on the fast-casual eatery chain.

For a look at today's options movers and commodities activity, head to page 2.

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