Oil Pulls the Market Lower Again

**Travis Hoium** (0:02)
Oil is up and stocks are down, and Motley Fool Hidden Gems Investing starts now.
Welcome to Motley Fool Hidden Gems Investing. I'm Travis Hoium, joined today by Lou Whiteman and Rachel Warren. Guys, we gotta start with the topic of the day, which is the market is down. Oil is up about 5% as we're recording early on Wednesday. So Rachel, this does seem to be a bit of a trend, at least over the past couple of weeks. NASDAQ is down about 5%, the NASDAQ 100 We're starting to see a little bit of a pullback there. Maybe that's valuation based. Maybe that's a little bit of, you know, we're waiting for earning season to begin, but now we have this oil thing going on. So what are the headlines that people need to keep in mind as they're looking at their investments today?

**Lou Whiteman** (0:52)
Yeah, I mean, there's a few factors at play. Obviously, oil and inflation are two big ones. The US just canceled its sanctions waiver on Iranian oils. The ceasefire has been declared over. That basically means less oil is likely to be moving around the world. We've seen Brent crude prices go up. Tech stocks are obviously taking a big hit because US inflation is already quite warm at 4.2 percent. The worry about some of these spikes is that the Fed will keep interest rates higher for longer.
When interest rates stay high, investors are less willing than they might be in other periods to pay those premium prices for the tech companies that move the market and promise huge profits down the road. You could look at the chip sector this week. Had Samsung reported a massive 19-fold jump in profits with a huge AI demand but the stock still fell.
I think a lot of what we see is this Wall Street being trapped in a short-term 90-day game. A lot of the daily market volume is driven by quantitative computer algorithms and when scary headlines hit the tape, those models often trigger those sell orders. I think that's also something we're seeing at play right now.

**Travis Hoium** (1:56)
Lou, computers have been really run in the market for quite a while, but it does seem like we're in a period where the reactions.
Oil is something we talked about like six months ago, and it hasn't turned out to be a huge deal. Is this a huge deal or is this just the day-to-day volatility that we always see in the market?

**Rachel Warren** (2:19)
Oil has spiked to levels that are still below June 24th prices, just to give some perspective here. A lot of this is headline writing, and a lot of this is ignore the noise. I mean, and I don't think we should over-read in anything. Like, you know, with all respect, I would be shocked if investors were really worried that oil will change the Fed's interest rate course.

**Travis Hoium** (2:41)
Well, a couple of drops in the stock market, and it seems like the policy decisions turned pretty quickly.

**Rachel Warren** (2:46)
Right. Well, I mean, I think what's probably going on is uncertainty, plus that, yes, if Iran is back on, then the already fragile consumer could become further stressed, which is a much bigger deal in interest rates. So there is thought processes here. But look, we're up 9% for the year.
Nasdaq is up more than that. We are doing just fine. This is normal. We're coming into earnings season. I think, look, there's a real risk that the market will be green by the time anyone hears this podcast.
It's so important not to just overthink any one day. I had in the early days of Twitter, I made a little bot that just said every day, the market is either up or down and it just pulled the top headline on Yahoo Entertainment as the reason why. So every day it said, stocks fall on Taylor Swift releasing new album. And that to me made more sense than most of the headlines I see explaining why stocks move on any given day.

**Travis Hoium** (3:50)
Lou, I wanted to get your thoughts on a dynamic that I think I see in the market, that may or may not be confirmed. We will know this in hindsight. But it seems like when I started investing in the 90s, you can go back to the, all the way back to the Great Depression. And things were relatively correlated. I learned about this in business school. Maybe you want to have some uncorrelated stocks, but a lot of stocks were correlated and so you would have the market is up. So almost everything is up and over time, your winners would be the ones that are up a little bit more than your losers. But there wasn't this massive segment of the market that was inversely correlated as we would say with the market. Now we get to this time where in 2022, when a lot of stocks crashed, when a lot of tech stocks crashed, if you were in industrials or energy, you may not even have noticed. And so some segments of the market were feeling a ton of pain and some weren't feeling anything. Now we get to this year. If you were invested in software stocks, some of the best software companies over the past 10, 20 years, you were just getting crushed early in 2026 But if you were invested in Neo Clouds and Memory, you're crushing the market. I mean, you know, 50%, 100% gains aren't out of the ordinary there.