OPEC+ Production Cut Spurs Energy Sector Rally

In an unexpected decision, OPEC+ declared a reduction in production by 1.16 million barrels per day, beginning in May and lasting through the end of the year. This sparked mixed trading at the beginning of the week, but oil-related transactions led to a nearly 5.0% increase in the S&P 500 energy sector. Chevron (CVX), one of the world’s leading integrated energy companies, was among the biggest beneficiaries in this sector.

Narrow Range and Mixed Trading

Major indices traded within a tight range and yielding mixed results. The Dow Jones Industrial Average performed better throughout the session, while the S&P 500 initially climbed to 4,127 but later gave up those gains and then some. The Nasdaq Composite remained in the red throughout the day but closed higher than its lowest point.

Chevron Spearheads Energy Sector Surge

The S&P 500 energy sector’s rally was primarily fueled by the 6.9% increase in WTI crude oil futures, reaching $80.60/bbl. Chevron was one of the most significant gainers, with its stock rising by 4.2%. This helped balance out losses in other areas, such as real estate and utilities.

Tesla Suffers After Q1 Production and Delivery Figures Revealed

Tesla, a leading electric vehicle and clean energy company, experienced a drop of over 6.0% after announcing Q1 production and delivery numbers. This decline, along with Amazon.com’s loss, negatively impacted the consumer discretionary sector, which ended close to the bottom of the group. The recent rise in gasoline prices also contributed to the sector’s weakness, as it could lead to increased costs for consumers.

Real Estate and Utilities Sectors Show Weakness

Both the real estate and utilities sectors experienced declines, with decreases of 1.0% and 0.7%, respectively. The downturn in the real estate sector was attributed to concerns about rising interest rates and a potential slowdown in the housing market. The utilities sector’s decline was due to a sell-off in defensive stocks as investors shifted their attention to growth-oriented stocks.

Treasury Yields Decrease After March ISM Manufacturing Index

Treasury yields declined after the March ISM Manufacturing Index reported its fifth consecutive contraction reading. The 2-year Treasury note yield fell by seven basis points to 3.99% after reaching 4.14% overnight. The 10-year note yield also dropped by six basis points to 3.43% after hitting 3.54% overnight. The reduction in Treasury yields was attributed to the weak economic data, which raised concerns about the US economy’s strength.

Key Insights from Economic Reports

The final reading of the March Manufacturing PMI dropped to 49.2 from 49.3. The March ISM Manufacturing Index fell to 46.3% from 47.7% in February. Total construction spending decreased by 0.1% month-over-month in February, following an upwardly revised 0.4% increase in January. Total private construction remained unchanged month-over-month, while total public construction declined 0.2% month-over-month. On a year-over-year basis, total construction spending increased by 5.2%.

Looking Forward

On Tuesday, market participants will receive February JOLTS Job Openings and February Factory Orders at 10:00 a.m. ET. Investors will closely monitor these reports for any signs of the US economy’s strength and the job market’s condition.

Market Recap

In summary, the announcement by OPEC+ to cut production by 1.16 million barrels per day from May through the end of the year led to a rally in the energy sector, with Chevron emerging as one of the major winners. The main indices experienced mixed trading, with the Dow Jones Industrial Average outperforming. While the real estate and utilities sectors showed weakness, Treasury yields receded following the March ISM Manufacturing Index, and gold futures gained strength as the US dollar weakened. Traders will closely monitor economic reports such as the February JOLTS Job Openings and February Factory Orders for any signs of the US economy’s strength and the job market’s status.