Stock Market News for January 20, 2015 – Zacks Investment Research
Markets were closed on Monday due to the Martin Luther King Jr. Day holiday. Investors will thus have Tuesday as the first trading day of the week, and would look forward to snap a four-week losing streak. Markets had ended in the green last Friday. But these gains, that ended a five-day losing run, could not help benchmarks close in positive territory. Last week, the S&P 500, Dow and Nasdaq dropped 1.3%, 1.3% and 1.5%, respectively.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article
So far in January, the Dow Jones Industrial Average is down nearly 1.8% and is currently at 17,511.57. The Standard & Poor 500 is at 2,019.42, after dropping 1.9% in January. The tech-laden Nasdaq Composite Index stands at 4,634.38 and is down 2.2% in January. The CBOE Volatility Index (VIX) is now up 9.1% year to date. VIX has an inverse relationship with markets, suggesting it moves higher if market drops and vice versa.
Plunge in crude prices continued to adversely affect markets this year. Oil prices had slumped below $45 a barrel, affecting energy shares on most days. Amidst the plunge in oil prices, Goldman Sachs (GS – Analyst Report) reduced its three-month price forecast for West Texas Intermediate (“WTI”) to $41 per barrel from $70 and Brent crude price forecast to $42 per barrel from $80. For six-months, WTI price forecasts have dropped to $39 from $75. The guidance cut came a week after Citigroup (C – Analyst Report) had lowered its 2015 and 2016 crude oil projections.
Crude prices have however gained on the last two occasions. At the end of day on Jan 19, WTI Crude Oil was up 5% to $48.69 and Brent Crude Oil gained a meager 0.04% to settle at $47.69. Oil prices had gained last 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.
Also this month, decline in average hourly wages dented investor sentiment despite strong nonfarm payroll data. Average hourly earnings contracted 0.2% in December, contrary to the consensus estimate of 0.2% rise. Disappointing economic data including ISM Services Index and factory orders dampened investor confidence. The Board of Governors of the Federal Reserve System reported a decrease in industrial production.
As for the earnings numbers, Alcoa Inc. (AA – Analyst Report) unofficially kicked off the earnings season with encouraging earnings results. The Goldman Sachs Group reported fourth-quarter 2014 earnings per share of $4.38, beating the Zacks Consensus Estimate of $4.29. Meanwhile, the largest three banks, JPMorgan Chase & Co. (JPM – Analyst Report), Bank of America Corporation (BAC – Analyst Report) and Citigroup 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.
In the latest developments, International Monetary Fund has made the steepest cut to the world growth forecast in three years. IMF now sees global growth at 3.5% in 2015, down from previous projection of 3.8%. IMF also lowered forecast for 2016 to 3.7% from 4.1% projected previously. Separately, China reported GDP growth of 7.4% in 2014, slowest since the 3.8% growth registered in 1990. Growth was also down from 7.7% in 2013. It was within the government’s target of nearly 7.5%.
Investors will also look forward to corporate results. Among key firms, Delta Air Lines (DAL – Analyst Report), Morgan Stanley (MS – Analyst Report), Johnson & Johnson (JNJ – Analyst Report) and Halliburton (HAL – Analyst Report) are expected to release results before the opening bell today. International Business Machines Corporation (IBM – Analyst Report), Netflix (NFLX – Analyst Report) may report after the close of markets.
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Stock Market News for January 20, 2015 – Zacks Investment Research
