US shares were lower at midsession on Friday, taking their cue from weaker oil prices, while investors sought safer haven in debt.
The back end of the yield curve was the most coveted among investors, who have been forced further up the maturity dates by the paltry returns offered on more natural safe haven plays in the two-year debt zone.
The influential 30-year swap rate, which is the fixed interest rate paid on a transaction where investors exchange a fixed-rate of interest for a floating-rate interest, traded down to 1.956% on Friday, lower than its weakest closing price on February 11 – which was the nadir for stocks in 2016.
The S&P 500 index was down 0.8% at 2,098, led by a spate of energy stocks including NRG Energy Inc (NYSE:NRG), Southwestern Energy Co (NYSE:SWN), Chesapeake Energy Corp (NYSE:CHK), Murphy Oil Corp (NYSE:MUR) and Marathon Oil Corp (NYSE:MRO) and Devon Energy Corp (NYSE:DVN). All were in the top 10 fallers.
The S&P Midcap 400 was enduring one of the sharpest percentage declines of the year, off 1.2% at 1,502, led by Sm Energy Company (NYSE:SM), Denbury Resources (NYSE:DNR) and Consol Energy Inc (NYSE:CNX).
Similarly, the S&P Smallcap 600 was off 1.1% at 714 and led by Northern Oil and Gas (NYSE:NOG).
After a three-day rally which took oil prices above $51 for the first time since July 2015, the US benchmark West Texas Intermediate came off its peaks on Thursday and extended its decline on Friday. It was last down 2.4% at $49.33.
Open
Stocks opened on the back foot as expected, taking their lead from European markets.
The weakening oil price has not helped sentiment; West Texas Intermediate for July delivery was down 72 cents, or 1.4%, at $49.85 a barrel.
The S&P 500 was down 15 points, or 0.7%, at 2,100, while the Dow Jones was off 86 points (0.5%) at 17,900.
Stock offerings were in focus in early deals. Gevo Inc (NASDAQ:GEVO) lost a third of its value, sliding to $0.46 as it announced the price of its share offering to raise $9.5mln.
The renewable chemicals and bio-fuels company said the new shares would be offered at 45 cents each.
Real estate company Great Ajax Corp (NYSE:AJX) fell almost a dollar to $13.02 as it said it was seeking to raise around $30mln through the issue of 2.3mln shares.
Pre-open
The Dow Jones average is set for a triple digit fall, with investors taking their cue from Europe, where markets are reeling.
“Apprehension likely stems from what bearing China data (Industrial Production, Retail Sales, Investment) will have on sentiment come Monday morning as well as a US dollar bounce hurting the commodity space, taking oil from its 2016 recovery highs,” suggested Mike van Dulken, head of research at Accendo Markets.
As ever, gold is proving a popular haven for risk-averse investors, with the price of the yellow metal reaching a three-week high this morning.
The Dow Jones average, which dipped below the 18,000 level yesterday to close at 17,985, is set to open at around 17,872, while the broader-based S&P 500 is seen opening around 14 points lower at 2,101.
On the corporate front, Bank of America (NYSE:BAC) shares have been marked down in pre-market trading after a court in New York instructed the bank to spill the beans on its 2008 takeover of CountrywideFinancial.