Benchmarks ended Monday’s trading session in the red as investors feared a stronger dollar and weaker oil prices may affect first quarter earnings results. Investors were also apprehensive about the timing of the Federal Reserve’s decision to hike federal funds rates.
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The Dow Jones Industrial Average (DJI) declined almost 0.5%, to close at 17,977.04. The Standard & Poor’s 500 (S&P 500) decreased 0.5% to 2,092.43. The tech-laden Nasdaq Composite Index closed at 4,988.25; losing almost 0.2%. The fear-gauge CBOE Volatility Index (VIX) climbed 10.8% to settle at 13.94. A total of about 5.4 billion shares were traded on Monday, less than the last five sessions’ average of 6 billion. Decliners outpaced advancing stocks on the NYSE. For 60% stocks that declined, 36% advanced.
Investors remained concerned about first quarter earnings results. Stronger U.S. dollar is expected to have a negative impact on multinationals’ earnings results. Stronger dollar makes their products costlier and decreases the profits earned in other currencies. The U.S. dollar index, which measures the currency’s strength against a basket of foreign currencies, gained 0.1% to 99.48 on Monday.
The dollar gained on weak Chinese trade data. China’s exports dropped 15% year over year in March. Imports decreased 12.7%. China’s trade surplus came in at $2.93 billion in March, well short of February’s trade surplus of $60.6 billion. Sluggish demand at home and abroad affected both exports and imports of the world’s second largest economy.
Dismal Chinese trade data raised hopes of stimulus measures in China, which in turn boosted oil prices. The prices of WTI crude oil and Brent crude oil increased 0.5% and 0.1% to $51.91 per barrel and $57.93 a barrel, respectively. However, gains in oil prices failed to boost energy shares. Oil prices have declined significantly since mid of last year and are expected to weigh on energy companies earnings results.
The Energy Select Sector SPDR (XLE) declined 1%. Dow components Exxon Mobil Corporation (XOM – Analyst Report) and Chevron Corporation (CVX – Analyst Report) dropped 0.3% and 0.4%, respectively. Other key energy stocks such as Schlumberger Limited (SLB – Analyst Report), EOG Resources, Inc. (EOG – Analyst Report) and Transocean Ltd. (RIG – Analyst Report) decreased 1.2%, 1.9% and 1.3%, respectively.
The Utilities Select Sector SPDR (XLU) also declined 1%. Key utilities stocks including NextEra Energy Inc (NEE – Analyst Report), Exelon Corporation (EXC – Analyst Report), Southern Company (SO – Analyst Report), PG&E Corporation (PCG – Analyst Report) and Duke Energy Corporation (DUK – Analyst Report) decreased 1.1%, 0.8%, 0.9%, 1.3% and 0.8%, respectively.
Also, the Industrial Select Sector SPDR (XLI) decreased 0.9% after its largest component General Electric Company (GE – Analyst Report) fell 3.1%. Last Friday, General Electric’s decision to divest most of its financial service businesses and its plan to repurchase shares had helped the sector gain the most among the S&P 500 sectors.
Monday’s losses were broad based, with 9 out of 10 S&P 500 sectors ending in the red. Only, the financial sector was able to buck the trend and settled in the green. The Financial Select Sector SPDR (XLF) gained 0.4%. Some of the nations’ biggest banks including JPMorgan Chase & Co. (JPM – Analyst Report) and Wells Fargo & Company (WFC) are expected to report earnings results today.
As of Monday, 25 S&P 500 members posted first quarter earnings up 10.2% on 7.4% revenue gains, with 80% beating earnings per share estimates. Among the 25 members, 44% were able to come ahead of revenue expectations.
Investors also looked for clues on the timing of rate hike. Last week, minutes from the Federal Open Market Committee’s (FOMC) meeting on Mar 17-18 stated officials were divided on the timing of raising interest rates.
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