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T3’s Take: Oil and Biotech Scream but Fail to Start a Party

1) Oil Blasts Into Orbit Today, we saw the biggest decline in US crude inventories since January 1999. The Energy Information Administration said US crude stocks fell -14.5 million barrels last week. Traders were expecting a 905K increase, so needless to say, the market was taken by surprise. WTI crude rose 4.2% to $47.41, and in turn, energy stocks led the market. Oil service names were especially strong. However, we still see a lot of conflicting headlines regarding possible changes in OPEC policy, so stay on your toes. 2) Biotech Rips on More Deal Hopes Yesterday, biotech caught a bid into the close after Reuters reported that GW Pharmaceuticals (GWPH) hired advisers after being approached for a takeover. Today, Gilead (GILD) added to the positivity by saying at an investor conference that it “feels an urgency” to do deals, noting an interest in cancer drugs. Traders immediately looked at cancer treatment specialists  Tesaro (TSRO) and Clovis Oncology (CLVS) as potential targets, and both stocks rose sharply today. The Nasdaq Biotech Index ETF (IBB) rose 0.7% to $288.03, vastly outperforming the major indices. 3) Stocks Grind Gears Even with crude oil and biotechnology rocking hard, the S&P 500 couldn’t drive any upside, and it declined -0.2% to 2181. That felt a bit odd, since typically, stocks perform well when oil and biotech rally. Apple (AAPL) sank -2.6% on a downgrade from Wells Fargo, which weighed on the Nasdaq. Gold took a hit today as the dollar rose sharply against the yen, which sent gold miners (GDX) sharply lower. We also saw weakness in US Treasuries, retailers, and real estate names. Friday’s Economic Calendar US Economics (Time Zone: EDT) 08:15 Fed’s Rosengren to Deliver Economic Forecast in Boston 09:30 Fed’s Kaplan Speaks in Austin, Texas 10:00 Wholesale Inventories MoM (Jul F): exp. 0.10%, prior 0.00% 10:00 Wholesale Trade Sales MoM (Jul): exp. 0.20%, prior 1.90% 13:00 Baker Hughes U.S. Rig Count (9/9): prior 497 13:00 Baker Hughes U.S. Rotary Gas Rigs (9/9): prior 88 13:00 Baker Hughes U.S. Rotary Oil Rigs (9/9): prior 407 Global Economics 04:30 GBP Goods Trade Balance 08:30 CAD Unemployment Rate Earnings Before Open: Hovnanian Enterprises (HOV) Kroger (KR)  Mattress Firm Holding (MFRM) After Close: None of Significance