Stock Market News for January 12, 2015 – Zacks Investment Research
Benchmarks snapped two-straight days of solid gains to end in the red on Friday as decline in average hourly wages dented investor sentiment despite strong nonfarm payroll data. Moreover, slump in oil prices after gaining for two-consecutive days also dampened investor confidence. Benchmarks also ended the volatile week in the negative territory.
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 almost 1%, or 170.50 points, to close at 17,737.37. The Standard & Poor 500 (S&P 500) lost more than 0.8% to close at 2,044.81. The tech-laden Nasdaq Composite Index closed at 4,704.07; declining 0.7%. The fear-gauge CBOE Volatility Index (VIX) gained 3.2% to settle at 17.55. A total of about 5.37 billion shares were traded on NYSE on Friday. Decliners outpaced advancing stocks on the NYSE. For 61% stocks that declined, 36% advanced.
On Friday, the U.S. Department of Labor reported that the unemployment rate declined to 5.6% in December from 5.8% in November. This was also better than the consensus estimate of 5.7%. Moreover, it was reported that the economy had created 252,000 new jobs in December, ahead of the consensus estimate of 237,000. However, the tally was behind the November’s number of 321,000, which was revised down from the reported figure of 353,000. Overall for 2014, 2.9 million jobs were added. This is the strongest year for jobs growth since 1999.
However, average hourly earnings contracted 0.2% in December, contrary to the consensus estimate of 0.2% rise. The labor market had witnessed 0.4% growth in average hourly earnings in November. This contraction in wage growth also had a negative impact on labor force participation rate. Civilian labor force participation rate declined 0.2% to 62.7% in December. This indicates that while the overall employment picture is indeed looking much more positive, most of the jobs being added to the workforce are of the low-wage variety. Analysts expect that the contraction in wage growth may spur the Fed to hike interest rate sooner.
Separately, after gaining for two-consecutive days, the price of WTI crude oil declined 0.9% on Friday to $48.36 per barrel. Moreover, the price of Brent crude oil dropped 1.7% to $50.11 a barrel. The decline in oil prices dragged down the Energy Select Sector SPDR (XLE) on Friday. The sector declined 0.8%. Key energy stocks including Schlumberger Limited (SLB – Analyst Report), Halliburton Company (HAL – Analyst Report), Chevron Corporation (CVX – Analyst Report) and Kinder Morgan, Inc. (KMI – Analyst Report) lost 1.8%, 1%, 2% and 1.3%, respectively.
Moreover, shares of Bed Bath & Beyond Inc. (BBBY – Analyst Report) declined 6.8% after posting third quarter fiscal 2014 net sales of $2,943 million, missing the Zacks Consensus Estimate of $2,968 million. Also, the year-over-year increase of 2.7% in net sales came below its own guidance range of 2.8%-3.7%. The company now anticipates sales growth in the range of 4.4%–5.4% for the fourth quarter compared with a 4.5%–5.5% increase projected earlier. The company reported third quarter earnings per share of $1.19, in line with the Zacks Consensus Estimate.
Over the week, the Dow, S&P 500 and Nasdaq declined 0.5%, 0.7% and 0.5%, respectively.
The slump in oil prices due to an increase in production of oil and strengthening of the dollar was one of the main factors that dragged down benchmarks. Moreover, disappointing economic data including ISM Services Index and factory order report dampened investor confidence. Political uncertainty in Greece and Bill Gross’ dismal outlook for 2015 also dented investor mood.
However, Automatic Data Processing, Inc.’s (ADP – Analyst Report) encouraging job data and recovery in oil prices boosted markets on Wednesday and Thursday. Moreover, possibility of additional stimulus measures in the Eurozone and subdued fears about Greece exiting the European Union also limited losses. Fed minutes’ assurance that the central bank will be “patient” before hiking interest rates also added to the bullish sentiment.
Follow this link:
Stock Market News for January 12, 2015 – Zacks Investment Research
