Markets

Decline In Oil Prices To Weigh On Markets

The major indexes are on track to start today's session in weak territory, building on an oil-inspired Thursday sell-off.

Investors found their peace with the Fed, with the rate hike reassuring the economy's health. But declining oil prices have exactly the opposite effect, with the latest leg down in oil prices adding to anxieties about the high-yield bond market. This issue stokes fears of a major credit market crisis along the lines of what we experienced as a result of the housing bust in 2008.

As we have stated in this space in recent days, the credit market problem is restricted to cash flow issues with borrowers in the energy and broader mining space. Recent dividend cuts from Kinder Morgan ( KMI ) and Freeport-McMoRan ( FCX ) as a way to conserve cash confirm the mining space's problems. Some adjacent industries that supply to the energy and mining spaces will likely get caught up in the high-yield scare, but most of the other industries appear to have healthy balance sheets.

Beyond oil prices, we got positive quarterly results this morning from Darden ( DRI ), while KarMax ( KMX ) came short of estimates. The restaurant chain came out with improving comps and margins and a raised guidance for the year. Lennar ( LEN ) beat estimates on the back of strength in new orders and deliveries.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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