The interconnectedness of the financial and commodity markets is sometimes hard to fathom. But news that a major hedge fund would shut down after losing almost 40% of its value put the relationship between the markets into better focus.
The hedge fund, run by a well-known and respected advisor, made bad bets in a couple of markets, including crude oil. The losses were enough that the fund is returning remaining funds to investors, so all its positions will be closed out. That includes positions in the stock market as well as commodities, which is one reason cited for this week's weakness in the stock market.
Initially, the Dow looked ready to start the new month like gangbusters, posting sharp gains on better than expected economic news, the stronger dollar and a big break in crude oil. However, the crude oil plunge turned out to be a double edged sword, because it sent energy stocks lower. Some traders have been buying the stocks as a surrogate from crude oil, and they were punished hard.
To read Bryce Knorr's complete financial review, click HERE.