Stock Market News for January 16, 2015 – Zacks Investment Research
Benchmarks ended in negative territory for the fifth-straight session on Thursday following the Swiss National Bank’s surprise move to drop its long-standing exchange rate of the Swiss franc against euro. Moreover, disappointing earnings results from Bank of America and Citigroup, and dismal economic data weighed on markets. Also, another decline in oil prices dragged down energy shares on Thursday. The S&P 500 ended below 2000 for the first time since Dec 16.
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 0.6%, or 106.38 points, to close at 17,320.71. The Standard & Poor 500 (S&P 500) lost 0.9% to close at 1,992.67. The tech-laden Nasdaq Composite Index closed at 4,570.82; declining 0.5%. The fear-gauge CBOE Volatility Index (VIX) rose 4.2% to settle at 22.39. A total of about 4.28 billion shares were traded on NYSE on Thursday. Decliners outpaced advancing stocks on the NYSE. For 63% stocks that declined, 34% advanced.
On Thursday, the Swiss National Bank (SNB) decided to remove its three-year old policy of maintaining minimum exchange rate of 1.20 Swiss francs to 1 euro. Following the announcement, Swiss franc soared more than 20% against euro and jumped 25% against dollar to 0.8900 franc per dollar. The SNB was maintaining this minimum exchange rate policy since Sep 2011 in order to control rising value of franc.
In recent times, Swiss franc was facing huge pressure due to this minimum exchange rate policy. This is because euro was becoming weaker against major currencies due to sluggish economic conditions in the Eurozone. Moreover, increasing possibility of the European Central Bank (ECB) expanding its QE program next week intensified the pressure. This is because investors were purchasing euros at a constant exchange rate of 1.2009 francs per euro. This additional pressure on the Swiss franc forced SNB to do away with its policy of maintaining minimum exchange rate.
Separately, shares of Bank of America Corporation (BAC – Analyst Report) dropped 5.2% after reporting fourth quarter earnings per share of 25 cents, declining from the year-ago quarter’s figure of 29 cents. Earnings were negatively impacted by higher provision for credit losses and lower revenues. However, fourth-quarter adjusted earnings of 32 cents per share came in a cent ahead of the Zacks Consensus Estimate.
Moreover, Citigroup Inc.’s (C – Analyst Report) shares declined 3.7% after posting fourth quarter adjusted earnings per share of 6 cents, below the Zacks Consensus Estimate of 9 cents. Further, earnings came in significantly below the year-ago figure of 82 cents per share. For the year ended 2014, adjusted earnings per share came in at $3.55, significantly lower than prior year figure of $4.37 per share. Citigroup posted adjusted revenues of $17.81 billion, which missed the Zacks Consensus Estimate of $18.71 billion. Also, adjusted revenues compared unfavorably with the year-ago number of $17.94 billion.
Dismal earnings results from these banking behemoths had a negative impact on the Financial Select Sector SPDR (XLF). The sector declined 1.2% on Thursday. Key financial stocks including JPMorgan Chase & Co. (JPM – Analyst Report), Morgan Stanley (MS – Analyst Report), Wells Fargo & Company (WFC – Analyst Report) and American Express Company (AXP – Analyst Report) dropped 3.2%, 1.8%, 1% and 1.4%, respectively.
Shares of Lennar Corp. (LEN – Analyst Report) plunged 7.2% after reporting a decline of 120 basis points (bps) in fourth quarter home sales gross margin, which came in at 25.6%. The company blamed rising labor, land and material costs, and increased incentives for the decline. Additionally, operating margin on home sales declined 90 bps to 16.0% during the quarter, owing to softness in gross margins. However, the company has reported strong quarterly earnings and revenues that significantly beat the Zacks Consensus Estimate.
Disappointing performance of Lennar dragged down SPDR S&P Homebuilders (XHB) by 4.1%. The sector was the biggest decliner among the S&P 500 sectors on Thursday. Key homebuilder stocks including PulteGroup, Inc. (PHM – Analyst Report), DR Horton Inc. (DHI – Analyst Report), Toll Brothers Inc. (TOL – Analyst Report) and KB Home (KBH – Analyst Report) declined 5.4%, 7.8%, 4% and 8.5%, respectively.
Meanwhile, after recovering on Wednesday, oil prices slumped again yesterday, which resulted in a decline in energy shares. The prices of WTI crude oil and Brent crude oil declined 4.8% and 2.1% to $46.25 a barrel and $47.67 per barrel, respectively. The Energy Select Sector SPDR (XLE) sector lost 1.3% yesterday. Key energy stocks including Chesapeake Energy Corporation (CHK – Analyst Report), Exxon Mobil Corporation (XOM), Chevron Corporation (CVX) and Schlumberger Limited (SLB) lost 2.3%, 0.9%, 1.2% and 2.3%, respectively.
On the economic front, the U.S. Department of Labor reported that initial claims increased significantly in the week ending Jan 10 to 316,000 from previous week’s level of 297,000. The figure was also higher than the consensus estimate of 296,000. This was the highest level of jobless claims since Sep 2014.
Moreover, the Producer Price Index declined 0.3% in December, witnessing biggest drop in December in around three years. However, the decline came in narrower than the consensus estimate of 0.4% drop. Moreover, the core PPI (PPI excluding food and energy prices) rose 0.3%, higher than the consensus estimate of 0.1% gain.
However, the Empire State Manufacturing Survey Index came in at 9.95 in January, improving from -1.23 in December. The reading also came ahead of the consensus estimate of 5. The reading indicated that manufacturing activity is witnessing steady growth in this area. Separately, the Philadelphia Fed Manufacturing Index declined to 6.3 in January from 24.3 in December, indicating that growth in manufacturing sector has slowed in this region as well.
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Stock Market News for January 16, 2015 – Zacks Investment Research
