Friday’s jobs report seems to have stopped the bull train dead in its tracks. After the best opening quarter in roughly 14 years, 2012 is now cast with uncertainty, as many doubt that economic data can support the current gains that major benchmarks are boasting on the year. The dreaded jobs report showed employment jump by 120,000, a poor result given expectations of 203,000. Though the unemployment rate was able to dip to 8.2%, most economists agree that job growth needs to be higher in order to sustain a full recovery [see also Crude Oil Guide: Brent Vs. WTI, What’s The Difference?].
One of the worst hit assets from Friday’s slump was crude oil; a commodity that has been fairly active on the year. A number of analysts believe that high oil prices are partly due to speculators driving up the price due to fears in Iran and other parts of the middle east. Oil saw its biggest jump as Iran threatened to close the Strait of Hormuz, a narrow body of water through which nearly 40% of the world’s supply of crude must pass. This led to back and forth threats between the U.S. and Iran until there were finally sanctions placed on Iranian exports, driving up crude and gas prices alike [see also Iran Tensions And Crude Oil: What It Means For Your Portfolio].
Now, it seems that Iran is willing to cooperate, as talks about nuclear policies (the stem of the issues) are slated to being mid-way through the month. A successful agreement could erase a fair amount of crude’s value, which could be good for consumers at the pump, but bad for traders and investors of this commodity. Yesterday saw crude oil tank as a number of traders sold off for varying reasons, with one of the most significant being the possibility of a peaceful agreement between the U.S. and Iran.
With crude coming off of a rough trading day, today’s ETF to watch will be the United States Oil Fund (USO), which tracks front-month crude oil futures. USO is one of the most popular commodity ETFs in the world, with over $1.6 billion in total assets as well as an average trading volume nearing 9 million. The fund is up by just over 1% on the year, but stands to lose a fair amount of value if crude continues its slide. Look for USO to be extremely active today as traders may try to buy in at a depressed price, or run for the hills and sell their positions before things get any worse [see also Oil ETF vs. Gas ETF: USO vs. UGA].
Disclosure: No positions at time of writing.