Stock Market News for January 06, 2015 – Zacks Investment Research
Benchmarks dropped sharply on Monday with energy shares leading the decline due to another slump in oil prices. An increase in production of oil and strengthening of the dollar were responsible for dragging oil prices to its lowest level since 2009. Renewed political unrest in Greece that may result in a possible departure of the country from Eurozone also dampened investor mood. The S&P 500 and the Dow suffered their largest one-day percentage decline since Oct 2014. The Nasdaq also closed in the red zone for the fourth-straight day on Monday.
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 1.9% or 331.34 points to close at 17,501.65. The Standard & Poor 500 (S&P 500) dropped 1.8% to close at 2,020.58. The tech-laden Nasdaq Composite Index closed at 4,652.57; declining 1.6%. The fear-gauge CBOE Volatility Index (VIX) surged almost 12% to settle at 19.92. A total of about 7.09 billion shares were traded on Monday, more than last months’ average of 6.87 billion. Decliners outpaced advancing stocks on the NYSE. For 76% stocks that declined, 23% advanced.
Benchmarks suffered their worst decline since October after U.S. oil prices slipped below the $50.00/bbl level for the first time in more than five years. The S&P 500 registered its fourth-straight session of losses. The gauge also registered its biggest one-day percentage decline since Oct 9. The Dow too had its worst day since October, with just 2 out of its 30 components ending in positive territory.
Oil prices took a beating on Monday. The West Texas Intermediate (WTI) crude oil price plunged 5.3% to settle at $50.04 per barrel. During the trading session, WTI crude oil price had fallen as low as $49.95 a barrel, its lowest level since May 1, 2009. Additionally, price of Brent crude oil also plummeted 6.2% to settle at $53.11 per barrel.
Abundant supply of oil and strength in dollar were cited as the reasons behind this renewed slump in crude oil prices. Rise in output from key producers including Russia and Iraq came in at a time when analysts have cut their demand outlook due to weak global economic scenario. While Russian oil output touched a post-Soviet era peak, Iraq’s oil exports was at a 35-year high. Moreover, a rally in the greenback weighed on dollar-denominated commodities, dragging oil prices below the psychological level of $50 a barrel.
Energy shares led the decline among the S&P 500 sectors due to this drop in oil prices. The Energy Select Sector SPDR (XLE) nosedived 4.1%. Shares of Noble Energy, Inc. (NBL – Analyst Report), Diamond Offshore Drilling, Inc. (DO – Analyst Report) and Anadarko Petroleum Corporation (APC – Analyst Report) tanked 9.6%, 8.7% and 7.9%, respectively. Other key stocks from the sector such as Exxon Mobil Corporation (XOM – Analyst Report), Chevron Corporation (CVX – Analyst Report), Schlumberger Limited (SLB – Analyst Report), Kinder Morgan, Inc. (KMI – Analyst Report) and ConocoPhillips (COP – Analyst Report) decreased 2.7%, 4%, 2.7%, 2.7% and 4.8%, respectively.
The Dow Jones U.S. Railroads Index declined 3.2% on concerns that this fall in energy shares may trim spending on capital equipment and crude transportation. Shares of Kansas City Southern (KSU – Analyst Report) and Union Pacific Corporation (UNP – Analyst Report) decreased 4.3% and 3.4%, respectively. Shares of Caterpillar Inc. (CAT – Analyst Report) also slipped 5.3% due to its exposure to oil and gas. Caterpillar turned out to be the Dow’s biggest loser.
The Materials Select Sector SPDR (XLB) declined 2.6%, emerging as the second biggest loser among the S&P 500 sectors. Key material shares such as Praxair Inc. (PX – Analyst Report), E. I. du Pont de Nemours and Company (DD), Monsanto Company (MON), The Dow Chemical Company (DOW) and LyondellBasell Industries N.V. (LYB) dropped 2.6%, 2.7%, 2%, 3.1% and 5%, respectively.
Among financial shares, Morgan Stanley (MS) fell 3.1% after one of its employees stole partial account information of around 10% of its clients from the Wealth Management department. The Financial Select Sector SPDR (XLF) declined 2.1%. Overall, all 10 sectors of the S&P 500 ended in the red.
However, among all the S&P 500 sectors, the healthcare sector was able to finish in the green before settling in the negative territory. Boston Scientific Corporation (BSX) was the S&P 500’s biggest gainer. Shares of Boston Scientific increased 4.5%. Shares of Gilead Sciences Inc. (GILD) also went up almost 2% after CVS Health Corporation (CVS) decided to give preferred status to Gilead’ drugs involved in the treatment of hepatitis C.
Meanwhile, investors remained concerned about the political uncertainty emanating from Greece. According to Prime Minister Antonis Samaras, a possible election victory of Greece’s anti-austerity, left-wing Syriza party may lead to the country’s exit from the European Union. Last Monday, the country’s parliament rejected Antonis Samaras’s preferred presidential candidate in a third and final vote. As a result of this development, there will be a snap election on Jan 25. German Chancellor Angela Merkel, in an attempt to calm investors, said Greece’s departure from the Eurozone can be managed. However, her comments failed to stop the euro from sinking to a nine-year low against the dollar.
Source article –
Stock Market News for January 06, 2015 – Zacks Investment Research
