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Stocks Seesaw — What Investors Are Weighing

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Stocks seesawed Tuesday, as oil prices jumped following a Saudi Arabia production cut announcement. Still, a few warning flags in the market were strewn about. 

All three major U.S. indices rose, with the S&P 500 up as much as 0.3%, before falling 0.3%. The 10 year treasury yield rose 0.72%, a risk-on signal. Crude oil prices rose 6%to over $25 a barrel.

Saudi Arabia said it is cutting oil production by 1 million barrels per day, beginning June 1. That’s a minimal cut, as even the 10 million barrel per day cut agreed on by OPEC earlier this year wasn’t enough to immediately save oil prices, as the velocity of the fall in demand has been great. But with optimism that economic declines will trough in the summer and more production cuts, oil is getting a boost of late. That’s key for employment in the U.S. 

Exxon Mobile  (XOM)  and BP Oil were outperformers, rising 1% and 0.5%. 

Other cyclical sectors outperformed. Large cap banks and some large consumer discretionaries rose more than the indices did. 

But with valuations stretched, some are getting cautious. The Russell 2000 small cap index fell 1% while the S&P 500 was falling. Small caps can often have heavy debt burdens and can be more volatile than large caps. 

Futures for the S&P 500 were also down Monday evening. 

One of the biggest fears in the market today: a re-spike of new virus cases as states and countries reopen economies.  

"In the coming days, we could expect a deteriorating risk appetite as investors move from pricing the revival of the economic activity to the evaluation of risks as the businesses get back to work,” Ipek Ozkardeskaya, senior analyst at Swissquote bank wrote in emailed remarks to reporters. "These risks include a renewed pickup in new coronavirus cases, the possibility of another halt in activity and a slower than expected recovery.” 

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