Stock Market News for January 07, 2015 – Zacks Investment Research
Benchmarks continued to suffer losses on Tuesday due to another slump in oil prices. Political uncertainty in Greece and Bill Gross’ dismal outlook for 2015 also dented investor mood. Further, data showing weaker-than-expected growth in the U.S. service sector and a drop in factory orders for four consecutive months weighed on investor sentiment.
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 0.7% or 130.01 points to close at 17,371.64. The Standard & Poor 500 (S&P 500) dropped 0.9% to close at 2,002.61. The tech-laden Nasdaq Composite Index closed at 4,592.74; declining 1.3%. The fear-gauge CBOE Volatility Index (VIX) went up 6% to settle at 21.12. A total of about 8.3 billion shares were traded on Tuesday, lower than last five session average of 5.5 billion. Decliners outpaced advancing stocks on the NYSE. For 66% stocks that declined, 32% advanced.
The S&P 500 declined for the fifth-straight session on Tuesday, its longest streak of consecutive losses since Dec 2013. During the trading session the gauge had dipped below the 2,000 level for the first time since Dec 17. The index has fallen 2.8% in the first three trading sessions this year. This turned out to be the indexes’ worst first three-day session in a year since 2008. The Dow also lost as much as 239 points during the trading session. The blue-chip index has now lost close to 500 points in the last two trading sessions. The Nasdaq too closed in the red zone for the fifth-straight day on Tuesday.
Abundant supply of oil dragged oil prices below the psychological level of $50 a barrel on Tuesday. Drop in oil prices raised concerns among investors of a slowdown in global economic growth, which in turn may weigh on the U.S. economy. The West Texas Intermediate (WTI) crude oil price plunged 4.4% to settle at $47.93 per barrel, for the first time since Apr 2009. Additionally, price of Brent crude oil also dropped 3.9% to settle at $51.10 per barrel.
Energy shares were hit hard due to this slump in oil prices. The Energy Select Sector SPDR (XLE) declined 1.5% on Tuesday and has tanked 24% since mid-Jun 2014. Dow components Exxon Mobil Corporation (XOM – Analyst Report) and Chevron Corporation (CVX – Analyst Report) declined 0.5% and 0.1%, respectively. Other key stocks from the sector including Schlumberger Limited (SLB – Analyst Report), Kinder Morgan, Inc. (KMI – Analyst Report), ConocoPhillips (COP – Analyst Report), EOG Resources, Inc. (EOG – Analyst Report) and Southwestern Energy Co. (SWN – Analyst Report) decreased 1.9%, 1.9%, 4.1%, 2.9% and 5%, respectively.
Investor sentiment was also dampened by a Financial Times report which cited Oxford Economics research according to which Greece’s Syriza party may win the upcoming election. A Syriza win would lead to a mandate that may push back austerity policies levied upon them by the European Union. On Monday, Prime Minister Antonis Samaras had said election victory for anti-austerity party may lead to Greece’s departure from the European Union.
Separately, fund manager Bill Gross’ comments that ‘many’ asset classes will end this year with losses also weighed on investor sentiment. Bill Gross stated: “Be prepared for low returns in almost all asset categories.”
Coming to domestic economic reports, the Institute for Supply Management reported that ISM Services Index decreased to 56.2% in December from November’s reading of 59.3%. The fall was more than the consensus estimate of a decrease to 58.9%. The reading has remained above the 50-mark for 59 consecutive months. Additionally, the Non-Manufacturing Index for December has decreased 7.2 percentage points to 57.2% from November’s reading of 64.4%. The New Orders Index also dropped to 58.9% in December from 61.4% in November.
Separately, the U.S. Department of Commerce reported new orders for manufactured goods decreased 0.7% in November, following a similar decline in October. The consensus estimated new orders for manufactured goods to remain unchanged in November. Excluding transportation, new orders declined 0.6% in November. Separately, unfilled orders and inventories data were up 0.4% and 0.1%, respectively. However, shipments were down 0.6%.
However, positive sales report from the auto industry was overlooked by investors. Total vehicle sales increased at an annualized rate of 16.8 million in December. Domestic-made vehicle sales also increased at an annualized rate of 13.6 million in December.
All these negative factors compelled investors to take money out of equities and park them in safe-haven assets such as Treasury bonds. The 10-year Treasury yield dropped below 2% for the first time since May 2013. This drop in 10-year Treasury yield had a negative impact on the financial sector. The Financial Select Sector SPDR (XLF) declined 1.5%, the highest among the S&P 500 sectors. Key stocks from the sector including Berkshire Hathaway Inc. (BRK-B), Wells Fargo & Company (WFC – Analyst Report), JPMorgan Chase & Co. (JPM – Analyst Report), Bank of America Corporation (BAC – Analyst Report) and Citigroup Inc. (C – Analyst Report) decreased 0.1%, 2.1%, 2.6%, 2.9% and 3.5%, respectively. Overall, 9 out of 10 sectors of the S&P 500 ended in the red.
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Stock Market News for January 07, 2015 – Zacks Investment Research
