MANHATTAN — After a rough first trading day of the year, the New York Stock Exchange on Tuesday is challenged to stay in positive territory. That could mean negative things for most people’s wallets, whether they’re directly invested in the market or not. The biggest reasons for the problems are based far from the New York metro area, but they hit squarely home nonetheless.
With tensions on the rise between two of the world’s biggest oil producers, and China’s manufacturing sector performing so weakly that it contributed to that country’s main stock market automatically shutting down, the first business day of the year, Monday, saw instability that caused a rough day on the main stock market in this country.
“You realize that problems abroad actually matter here at home,” Adam Johnson, business and markets editor at Bold.Global, said regarding the wild ride that Wall Street took on Monday, due in large part to Chinese and Middle Eastern volatility.
At one point, the Dow Jones Industrial Average plunged more than 463 points. A late rally left the Dow down 276 points, an improvement from its lowest point to be sure, but still a loss of 1.6 percent for the day.
Johnson elaborated on the two most unsettling factors, and their effect on people’s home economies.
“The problem with China is it’s, depending on how you want to count the number, the second or third largest economy in the world,” Johnson said. “Their exports are down, meaning the world is buying less, and their imports are down. That has a ripple effect across he entire world.”
Monday’s key market issues extend from the Far East to the Middle East, said Johnson, a former Wall Street oil trader.
“Saudi Arabia and Iran are fighting over who is the authority,” he told PIX11 News, “and they’re both large oil producers, obviously.”
The situation has heated up this week. Two more countries, Sudan and Bahrain — where there’s a major U.S. military base — have joined with Saudi Arabia in cutting off ties to Iran. There, protests continue over Saudi Arabia’s execution of revered Shiite cleric Nimr al-Nimr.
A situation like this would typically send oil prices skyrocketing. In this case, however, drivers like Abraham Yusuf, who was filling up his black sedan in Jersey City at $1.89 a gallon, pointed out what the situation is like.
“I saved $900 a year,” he said regarding his gasoline purchases in 2015. “Next year, $2000?” he asked. “I hope so.”
Gas prices are at their lowest point in seven years, a stark contrast to how they typically are when political strife affects major oil producing nations.
“We have so much oil,” Johnson said, “and the Saudis are going to keep producing, in part because they want to bankrupt Iran.”
“According to AAA,” he continued, “it saved the average American family $540 last year. That’s lower gasoline. You take that money, you can go spend it and it percolates through the economy. So all to that’s good.”
Johnson added one more point. Even though low gas prices that may be sustained for months leaves more money in most people’s pockets that they can use for consumer spending, it’s still not the very best situation.
“The single biggest contributor” to consumer spending, Johnson said, “is higher wages. People aren’t making enough money.”