Stock Market News for January 14, 2015 – Zacks Investment Research
Benchmarks ended in negative territory for the third-straight session on Tuesday erasing solid initial gains as another slump in oil prices weighed on energy shares. In the opening hours, markets were boosted by Alcoa’s encouraging earnings results and possibility of implementation of monetary stimulus in the Eurozone. The Dow declined around 400 points from its day’s high yesterday, witnessing its biggest intraday swing since Oct 15.
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The Dow Jones Industrial Average (DJI) declined almost 0.2% to close at 17,613.68. The Standard & Poor 500 (S&P 500) lost 0.3% to close at 2,023.03. The tech-laden Nasdaq Composite Index closed at 4,661.50; declining around 0.1%. The fear-gauge CBOE Volatility Index (VIX) rose 4.9% to settle at 20.56. A total of about 4.11 billion shares were traded on NYSE on Tuesday. Decliners outpaced advancing stocks on the NYSE. For 51% stocks that declined, 46% advanced.
Alcoa Inc. (AA – Analyst Report) unofficially kicked off the fourth quarter earnings season by reporting stronger-than-expected earnings results after the closing bell on Monday. Benchmarks opened higher on Tuesday, banking on the positive results. Alcoa reported fourth quarter adjusted earnings of 33 cents, beating the Zacks Consensus Estimate of 26 cents. The reported earnings per share figure was also significantly higher than the year-ago figure of 4 cents. Quarterly revenues of $6,377 million also came ahead of the Zacks Consensus Estimate of $6,023 million. However, shares of Alcoa declined 2.3% yesterday as material stocks were dragged down by decline in oil prices.
Moreover, increasing hopes regarding introduction of more intensive quantitative easing program in the Eurozone raised investor confidence. The European Central Bank (ECB) may opt for bond-purchasing program to boost the region’s economy in their next meeting, which is due on Jan 22. On Tuesday, a member of the ECB’s Governing Council, Ewald Nowotny said: “You always have to consider that monetary policy has an impact only after a long delay…That means if I want to do something I should do it sooner rather than later.” Moreover, it was reported that ECB is expecting a legal verdict in European Court regarding the QE program on Wednesday, which will clarify progress of the program.
However, markets failed to hold on to the solid gains and experienced a massive swing to end in the red zone following another slide in oil prices. The prices of WTI crude oil and Brent crude oil declined 0.4% and 1.8% to $45.89 per barrel and $46.59 a barrel, respectively. Moreover, the United Arab Emirates supported OPEC’s decision not to reduce its current level of production. The decline in oil prices had negative impact on the energy sector. The Energy Select Sector SPDR (XLE) declined 0.8% on Tuesday. Key energy stocks including Schlumberger Limited (SLB – Analyst Report), Halliburton Company (HAL – Analyst Report), Chevron Corporation (CVX – Analyst Report) and Exxon Mobil Corporation (XOM – Analyst Report) lost 0.4%, 0.7%, 1.6% and 0.4%, respectively.
Separately, shares of KB Home (KBH – Analyst Report) tumbled 16.3%, dropping to a two-year low, after reporting disappointing fourth quarter earnings report. The company reported fourth quarter earnings per share of 27 cents, significantly lower than the Zacks Consensus Estimate of 52 cents. KB Home also reported quarterly profit margin of 3.5%, declining from year-ago quarter’s 4.5%. Company’s CEO Jeffrey Mezger said disappointing margins may persist in the long run due to decline in demand.
Dismal earnings result from KB Home dragged down the SPDR S&P Homebuilders (XHB) 1.5% on Tuesday. The sector was the worst performer among the S&P 500 sectors yesterday. Key homebuilders stocks including PulteGroup, Inc. (PHM – Analyst Report), DR Horton Inc. (DHI – Analyst Report), Toll Brothers Inc. (TOL – Analyst Report) and Lennar Corp. (LEN – Analyst Report) declined 2.5%, 4.8%, 1.2% and 1.7%, respectively. Eight out of 10 S&P 500 sectors registered losses on Tuesday.
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Stock Market News for January 14, 2015 – Zacks Investment Research
