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Apr 23, 2018

The Wall Street Journal | Money Beat: Oil Near $70 Is a Good Thing Right Now on April 23, 2018.

The Wall Street Journal

Oil Near $70 Is a Good Thing Right Now

By Ben Eisen
Morning MoneyBeat is the Journal’s pre-market primer. To receive the newsletter via email, click here.
Market Snap at 04/23/2018 07:36:18 AM ET
S&P 500 Futures 0.01%
DJIA Futures -0.02%
U.S. 10 Year -7/32
WSJ Dollar Index 0.43%
Crude Oil -0.54%
Gold -0.63%
FTSE 100 -0.02%
Nikkei 225 -0.33%
DAX -0.09%
Hang Seng -0.54%
CAC 40 -0.06%
Shanghai -0.11%

Overnight Developments

  • Global stocks started the week slightly lower even as a selloff in bonds sent the 10-year Treasury yield near 3%. S&P 500 futures pointed to an opening gain of 0.1%.
  • The Stoxx Europe 600 was recently down by 0.05%.
  • Earlier, Asian bourses posted modest losses. Japan’s Nikkei Stock Average edged down 0.3% and Hong Kong’s Hang Seng fell 0.5%.
  • The Breakfast Briefing

    Higher oil prices stand to benefit the economy in the U.S., where oil production has ramped up sharply in recent years, economists say.
    After its biggest two-week jump since the end of 2016, Nymex crude oil is approaching $70 a barrel, and last week hit its highest since late 2014.
    U.S. crude oil field production has doubled over the last decade, according to the Energy Information Administration. And U.S. oil rigs have generally been reopening for business over the last year. That means the rebound in oil prices from their lows of two years ago is a boon for energy firms and the companies that supply them.
    S&P 500 energy companies are expected to report earnings growth of 78% for the first three months of the year, the biggest growth among the index's 11 sectors, according to FactSet.
    And some see higher oil prices as a sign of an already-robust economy. One sign of that: a rise in inflation, which has mostly held below the Federal Reserve's target of 2%. Reflecting those heightened expectations, the yield on the 10-year Treasury note climbed to its highest since early 2014 on Friday.
    Not everyone believes higher prices are a good thing, of course. On his Twitter account Friday, President Donald Trump wrote: “Oil prices are artificially Very High! No good and will not be accepted!”
    “It’s clear that he views rising oil prices not as a sign of a strengthening U.S. economy,” said Chris Rupkey, chief financial economist at MUFG.
    The tweet left some wondering whether Mr. Trump wanted a return to early 2016, when oil prices dropped below $30 a barrel. While the slide helped depress gas prices at the pump, a benefit for consumers, economists say that was outweighed by the slew of bankruptcies, layoffs and investment cutbacks among oil and gas firms.
    A continued rise in oil prices could eventually force the Federal Reserve to lift rates faster to clamp down on spiraling inflation. And higher oil prices could weigh on consumers by lifting prices at the pump. But for now, most economists would rather see oil prices approaching $70 per barrel than falling below $30.
    Will rising oil prices support the U.S. economy? Let the author know your thoughts at

    Daily Factoid

    On this day in 1856, the inventor Granville T. Woods was born in Columbus, Ohio. With only a fourth-grade education, he became one of the greatest African-American inventors, known for patents on the multiplex telegraph (which made train travel vastly safer by enabling moving trains to signal their location to stations and other trains) and improved overhead power lines for trains (which made trolleys possible).

    Key Events

    U.S. existing home sales for March are out at 10 a.m. ET on Monday. Economists expect an annual pace of 5.55 million, up slightly from the prior month.

    Stocks to Watch

    Apple—Up 0.6%: Shares of the iPhone maker have fallen in three straight sessions and are down 7% over that span on worries that demand could slow for its high-end smartphones.
    AT&T—Up 0.1%: The New York Times reported late in Friday's session that The Justice Department has opened an antitrust investigation  into potential coordination by AT&T, Verizon and a telecommunications standards organization to hinder consumers from easily switching wireless carriers.
    Halliburton—Up 0.1%: Halliburton reported adjusted per-share earnings in the first quarter that were one penny ahead of the FactSet consensus of 40 cents.

    Number of the Day

    General Electric shares rallied 3.9% to $14.54 Friday after the company reported progress on efforts to turn around its industrial businesses.

    Must Reads

    China’s Tencent Music is preparing an IPO after the successful debut of its European counterpart, Spotify. The offering could value the business at more than $25 billion, according to people familiar with the matter.
    Google-parent Alphabet unveils it earnings report after the closing bell for the first quarter. A one-time tax hit caused a $3 billion loss in the prior period. Alphabet said it would begin reporting the current fair value of nonmarketable securities—which means investors will likely get a peek at how Google values its investment in Uber Technologies.
    Congress just created a new tax break for millions of pass-through businesses. But every business owner doesn’t automatically qualify. The Journal’s Richard Rubin overcomes the obstacles to claim the 20% pass-through business deduction—on an actual obstacle course.
    Volkswagen is planning its return to the U.S. bond market for the first time since its emissions scandal, a move that would top a successful turnaround for the German auto maker.
    General Electric retirees who invested heavily in their former employer’s stock have been hit hard by the slide in shares’ value.

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