Oil Jumps & Stocks Drop – What’s Next?
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Why are oil prices rising while the stock market is dropping?
The stock market is down on Tuesday. Is this an overreaction or the reaction we should have had yesterday? Motley Fool Money with the Hidden Gems team starts now.
Welcome to the show. I am Travis Hoey. I'm joined today by Lou Whiteman and Matt Frankel. And guys, we have to start with the news of the day. That's it. The markets are down pretty big. Both the S&P 500 and the Nasdaq Composite down over one and a half percentage points. Crude oil is up 8% as we're recording. Lou, this is all in reaction to what's going on in the Middle East right now. But what's interesting about this is this didn't happen yesterday. These attacks, all the destructions going on started over the weekend. You would have thought, theoretically, that yesterday we would have had a big reaction from the market.
What factors are contributing to market uncertainty?
They waited a day. So what's going on here?
Great question. It started to happen yesterday, and then it suddenly turned around and didn't happen. I think part of this, and we're not a political show or anything, but there is what they call the taco trade. I think there is the assumption always out there in the markets that whatever new thing has happened will get turned around before it spirals out of control. Maybe today is comments overnight saying, we can go as long as it takes, we're not going to back down, just that energy seeping out of the market. But also, it could just be, wow, taco trade or not, this is serious stuff and it could get complicated quickly. It's risk-off because there's a lot of risk.
Matt, what are you thinking when you look at the market being down like this? Is this something that we should be worried about? Is it a buying opportunity? Where's your head at?
There were a couple of developments since yesterday that I think are contributing to this. To name the big one, a U.S.
How does the rise in oil prices affect consumer behavior?
embassy was just attacked since last night. I think that's adding to the uncertainty here. Uncertainty is really the word you're seeing here. When I see a broad-based sell-off like this, pretty much every sector is getting hit. Defense stocks are getting hit. That's the one sector you'd think would be up. Conservative plays like real estate investment trusts are getting hit. Those are normally considered safety stocks. When you see a big, broad-based downturn, it really just tells me it's uncertainty. The market doesn't know what to make. They don't know if this conflict is going to go on for a week, for six months, or whatever. And that's really what seems to be driving today's action.
One of the things I wanted to get your thoughts on is how this spills over into the regular economy. Because the rise in oil prices, I think, is really notable because that's something that people are actually going to feel in the U.S. Even if you're not going to feel all of the attacks that are going on in the Middle East, you are going to feel that I filled my gas tank this morning.
What insights can we gain from Target's recent performance?
It was significantly more expensive than it was yesterday. So... The historical parallel, at least in the last 20 years, is that if you go back to the financial crisis, one of the tipping points there was oil and gasoline got really expensive. Suddenly, that exposed a whole bunch of weakness in consumers. We'll talk about Target in a These kind of actions seem isolated from the economy, but the ways that they spill over actually do impact people's pocketbooks. If a barrel of oil goes to $100, suddenly that starts stretching consumers a little bit more. We've already seen weakness with restaurant stocks. We've seen weakness in certain segments of the retail sector. Is that something that we should at least have on our radar in 2026?
Absolutely. And look, there are all sorts of reasons to be concerned right now. But as an investor, I think you nailed the biggest concern. We've talked a lot, Travis, about the consumer isn't one person. It's just a critical mass of people who are able to get by, keep going with their routine.
Is Target at risk of becoming the next Kmart?
That's enough to keep the economy going. I don't think what's happening in the Middle East in and of itself can make a good economy a bad economy.
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Chapters
8 chapters
1
Why are oil prices rising while the stock market is dropping?
0:05–1:01
2
What factors are contributing to market uncertainty?
1:01–2:01
3
How does the rise in oil prices affect consumer behavior?
2:01–3:00
4
What insights can we gain from Target's recent performance?
3:00–4:12
5
Is Target at risk of becoming the next Kmart?
4:12–5:21
6
What should management do to improve Target's outlook?
5:21–6:28
7
How do insider buys influence investor sentiment?
6:28–7:45
8
What are the implications of recent insider buying at SoFi and other companies?
7:45–18:06