Stock Market News for January 19, 2015 – Zacks Investment Research
Benchmarks ended a five-day losing streak on Friday after energy shares recovered following a rally in oil prices. Oil prices registered their first weekly gain in last eight weeks on Friday. Meanwhile, investors remained focused on mixed economic data and corporate earnings. Investors also assessed Swiss National Bank’s surprise decision to do away with its long-standing decision of fixing the exchange rate of the Swiss franc against euro. However, benchmarks ended in the red for the fourth-straight week on Friday.
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The Dow Jones Industrial Average (DJI) gained 1.1% or 190.86 points to close at 17,511.57. The Standard & Poor 500 (S&P 500) went up 1.3% to close at 2,019.42. The tech-laden Nasdaq Composite Index closed at 4,634.38; gaining 1.4%. The fear-gauge CBOE Volatility Index (VIX) dropped 6.4% to settle at 20.95. The VIX remained above its 10-year average of about 20. It also stood above last year’s average of 14.2. A total of 4 billion shares were traded on Friday in NYSE. Advancers outpaced declining stocks on the NYSE. For 80% stocks that advanced, 18% declined.
Oil prices moved north on Friday after the International Energy Agency (IEA) said continuous slump in oil prices is expected to affect growth in oil output of producers other than the Organization of the Petroleum Exporting Countries (OPEC). This in turn is expected to increase demand for OPEC’s own production. IEA reduced its forecast for increase in oil supply by non-OPEC countries in 2015 by 350,000 barrels a day. IEA expects an increase in demand for OPEC’s oil this year by 300,000 barrels a day. The prices of WTI crude oil and Brent crude oil gained 5% and 0.04% to $48.69 a barrel and $47.69 per barrel, respectively.
Rally in oil prices had a positive impact on energy shares. The Energy Select Sector SPDR (XLE) gained 3.3%, the highest among the S&P 500 sectors. Dow components Exxon Mobil Corporation (XOM – Analyst Report) and Chevron Corporation (CVX – Analyst Report) both advanced 2.4%. Other key stocks from the sector including Schlumberger Limited (SLB – Analyst Report), Kinder Morgan, Inc. (KMI – Analyst Report), ConocoPhillips (COP – Analyst Report) and EOG Resources, Inc. (EOG – Analyst Report) increased 6.1%, 1.9%, 2.7% and 4.4%, respectively. Overall, all 10 sectors of the S&P 500 ended in the green.
Economic data came in mixed on Friday. The US Bureau of Labor Statistics came out with consumer price data; wherein it reported Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.4% in December. The decrease was wider than the consensus estimate of a decline of 0.3%. Consumer prices posted its biggest drop since the end of 2008 due to drop in gasoline prices.
Meanwhile, the Board of Governors of the Federal Reserve System reported a decrease in industrial production. The report stated industrial production dropped 0.1% in December after it increased 1.3% in November. This drop in industrial production in December was in contrast to the consensus estimate of it remaining unchanged. Industrial production dropped for the first time since August after unexpected warm weather suppressed demand for heating. Separately, capacity utilization rose to 79.7%, less than the consensus estimate of a rise to 79.9%.
Separately, a preliminary report showed that the University of Michigan/Thomson Reuters consumer-sentiment index climbed to 98.2 in January from 93.6 in December, its highest level since 2004. Strengthening of the labor market and decline in gasoline prices were cited to be the reasons behind this surge in consumer sentiment. Rise in consumer confidence in the U.S. also helped Treasury yields to move higher and end a five-straight session of losses on Friday.
On the earnings front, the Goldman Sachs Group, Inc. (GS – Analyst Report) reported fourth-quarter 2014 earnings per share of $4.38, beating the Zacks Consensus Estimate of $4.29. However, shares of the banking behemoth fell 0.7% after its revenue from institutional client services and investment banking took a beating.
The largest three banks, JPMorgan Chase & Co. (JPM – Analyst Report), Bank of America Corporation (BAC – Analyst Report) and Citigroup Inc. (C – Analyst Report) had posted their worst combined quarterly revenues this earnings season since 2011 due to a combined 23% drop in their fixed-income, currency and commodity segments.
Separately, shares of the PNC Financial Services Group, Inc. (PNC – Analyst Report) gained 2.5% after the company posted fourth-quarter 2014 earnings per share of $1.84 more than the Zacks Consensus Estimate of $1.74.
Meanwhile, investors assessed the consequences that markets may face after Swiss National Bank (SNB) dropped its long-standing exchange rate of the Swiss franc against euro. On Thursday, the SNB decided to remove its three-year old policy of maintaining minimum exchange rate of 1.20 Swiss francs to 1 euro. The Swiss franc was facing huge pressure due to this minimum exchange rate policy as the euro was becoming weaker against major currencies due to sluggish economic conditions in the Eurozone. This development dented investor sentiment on Thursday.
Through the week, the World Bank reducing its global economic growth outlook for 2015 and 2016, continued plunge in oil prices and a dismal retail sales report also added to the bearish sentiment. JPMorgan, Bank of America and Citigroup’s disappointing fourth quarter earnings results too had a negative impact on investor sentiment. For the week, the S&P 500, Dow and Nasdaq slipped 1.3%, 1.3% and 1.5%, respectively.
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Stock Market News for January 19, 2015 – Zacks Investment Research
