Will Fear, Uncertainty And Doubt Define The Markets This Morning?

Last week delivered a shocking amount of action to U.S. markets, but there was actually little actual movement. The Dow starts Monday up 1.1% from its level of a week ago, the S&P 500 is up .91%, and the NASDAQ is up 2.6%. The damage of the previous week, then, is half-way toward repair, with the market’s trough on Tuesday evening of 10% having turned into a two-week loss of roughly 5%.

Oil Drives Stock Market Rebound

Oil’s fall, and that of China’s stock market, led the way down, and oil has led the way back up, a two-day rally of 6.3% on West Texas Intermediate (WTI) crude, to $45.22, and a 5.3% rise in Brent North Sea oil to $50.50. This put the total gain for WTI oil at 11% on the week, 10% for Brent, but to get there, WTI had to bounce off a six-year low of $38.24.

Leaks and sabotage in Nigeria got a lot of the blame for the run-up, but the announcement that oil field services giant Schlumberger (NYSE:SLB) will buy Cameron International (NYSE:CAM) , the oil pipe kings,  for $14.8 billion, including debt, a 37% premium on Cameron’s previous price, also gave hope that the worst of the global oil crash may be over.

Despite this, there remains a lot of uncertainty about China, where most of the 5% gain last Friday came in the last half-hour of trading leading some analysts to predict that market still has another 15% to fall. U.S. traders may need an extra cognac to get to sleep Sunday.

FUD (Fear, Uncertainty and Doubt) Produces Paralysis

The FUD phrase dates from the 1980s, when Microsoft (NASDAQ:MSFT) used public relations to sew doubt among companies about switching to Apple (NASDAQ:AAPL) Macintosh computers while it readied what became Windows. Fear of loss, uncertainty about switching costs, and doubt about leaving the “mainstream” of computing caused paralysis among customers – enough so that when Microsoft finally had a windowing interface compatible with old MS-DOS data it took the market.