Stock Market News for February 19, 2015 – Zacks Investment …
Benchmarks ended mostly lower on Wednesday after Fed minutes showed officials debated the effects of hiking interest rates from near zero level. While “many” officials said premature rise in interest rates will hamper U.S. economic recovery, “several” officials opined delaying the same will result in high inflation. Meanwhile, a drop in oil prices dragged energy shares down. While the S&P 500 and the Dow closed in negative territory, the Nasdaq defied the trend and ended in the green.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article
The Dow Jones Industrial Average (DJI) declined 0.1%, to close at 18,029.85. The Standard & Poor 500 (S&P 500) lost a meager 0.03% to end at 2,099.68. The tech-laden Nasdaq Composite Index closed at 4,906.36; increasing 0.1%. The fear-gauge CBOE Volatility Index (VIX) went down 2.2% to settle at 15.45. A total of about 6 billion shares were traded on Wednesday, below this month’s average of 7.2 billion. Advancers outpaced declining stocks on the NYSE. For 53% stocks that advanced, 44% declined.
Minutes from the Federal Open Market Committee’s (FOMC) meeting on Jan 27-28 stated officials discussed when and how to hike federal funds rates. The minutes noted: “Many participants observed that a premature increase in rates might damp the apparent solid recovery in real activity and labor market conditions, undermining progress toward the committee’s objectives.” The minutes added that many officials were inclined toward “keeping the federal funds rate at its effective lower bound for a longer time.” Some officials said timing of raising interest rates wasn’t that important. Instead, they said Fed’s decision to raise rates quickly or slowly should depend on the economy’s performance.
The minutes also showed Fed officials were concerned about investors’ reaction to the “patient” word being dropped from guidance. This might result in market expectations of a rate hike to an “unduly narrow range of dates”, resulting in “undesirably tight” financial conditions.
Utilities shares gained on Wednesday as they tend to perform well in a low interest rate environment. The Utilities Select Sector SPDR (XLU) gained 2.4%, the highest among the S&P 500 sectors. Key utilities stocks including Southern Company (SO – Analyst Report), DTE Energy Company (DTE – Analyst Report), Exelon Corporation (EXC – Analyst Report) and PPL Corporation (PPL – Analyst Report) increased 2.9%, 3.2%, 2.5% and 2.5%, respectively.
On the other hand, financial shares fell as they benefit from higher interest rate situation. The Financial Select Sector SPDR (XLF) declined 0.6%. Key stocks from the sector such as Wells Fargo & Company (WFC – Analyst Report), JPMorgan Chase & Co. (JPM), Berkshire Hathaway Inc. (BRK-B) and Bank of America Corporation (BAC) decreased 1.5%, 1.2%, 0.3% and 1.9%, respectively.
Energy shares took a beating due to drop in oil prices. Prices of WTI crude oil and Brent crude oil declined 2.7% and 3.3% to $52.14 per barrel and $60.53 a barrel, respectively. Meanwhile, investors remained focused on upcoming weekly information on U.S. crude stockpiles. The Energy Select Sector SPDR (XLE) declined 1.2%, the biggest among the S&P 500 sectors. Key stocks from the sector including Chevron Corporation (CVX – Analyst Report), Schlumberger Limited (SLB – Analyst Report), ConocoPhillips (COP – Analyst Report) and EOG Resources, Inc. (EOG – Analyst Report) decreased 1.7%, 1.3%, 2.5% and 1.2%, respectively.
Separately, shares of Exxon Mobil Corporation (XOM – Analyst Report) dropped 2.2% after Berkshire Hathaway shed a $3.7 billion investment in the company. Reports of an explosion in one of its refinery near Los Angeles also had a negative impact on its share price. Exxon Mobil turned out to be the biggest drag on the S&P 500 and the Dow.
The day’s economic reports were mostly weaker than expected. The Bureau of Labor Statistics reported that the Producer Price Index decreased at a seasonally adjusted rate of 0.8% in January, more than the consensus estimate of a 0.5% decline. The decrease was preceded by December’s decline of 0.2%.
Additionally, the U.S. Department of Commerce reported that privately-owned housing starts declined by 2% to 1,065,000 from December’s revised tally of 1,087,000. The January number was also behind the consensus estimate of 1,069,000. Single-family housing starts declined 6.7% in January to 678,000 from December’s revised figure of 727,000. Additionally, building permits also decreased at a rate of 0.7% in January to 1,053,000, in contrast to the consensus estimate of an increase to 1,073,000.
Separately, the Board of Governors of the Federal Reserve System reported an increase in industrial production. The report stated industrial production rose 0.2% in January after it slipped 0.3% in December. However, this rise in industrial production in January was less than the consensus expectation of a rise by 0.4%. Separately, capacity utilization remained unchanged at 79.4%, less than the consensus expectations of a rise to 79.8%.
In earnings news, shares of Fossil Group, Inc. (FOSL – Analyst Report) plummeted 15.7% a day after the company reported fourth quarter of 2014 earnings of $3.00 per share, less than the Zacks Consensus Estimate of $3.10. Shares of Hilton Worldwide Holdings Inc. (HLT – Snapshot Report) also dropped 0.4% after posting fourth quarter 2014 earnings of 17 cents that lagged the Zacks Consensus Estimate of 18 cents. However, revenues of $2.83 billion beat the Zacks Consensus Estimate of $2.75 billion.
Meanwhile, investors kept an eye on positive developments in Greece. The European Central Bank (ECB) approved a $78 billion two-week extension on emergency funding for Greek banks. Last Thursday, ECB had increased the Emergency Liquidity Assistance to around 65 billion euros.
Source:
Stock Market News for February 19, 2015 – Zacks Investment …
