Stock Market News for June 05, 2015 – June 5, 2015 – Zacks.com
Benchmarks ended in the red on Thursday as a decline in jobless claims raised concerns about rate hike sooner than later. Meanwhile, IMF urged Fed not to hike rates until next year provided there is a clear indication of a pick up in wages and inflation rate. IMF also trimmed growth forecast on U.S economy, which added to investor concern. Lingering uncertainty over striking a deal between Greece and creditors also dampened sentiment.
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The Dow Jones Industrial Average (DJI) declined 0.9% to close at 17,905.58. The Standard & Poor’s 500 (S&P 500) also decreased 0.9% to 2,095.84. The tech-laden Nasdaq Composite Index closed at 5,059.12; declining 0.8%. The fear-gauge CBOE Volatility Index (VIX) surged 7.7% to settle at 14.71. A total of about 6.3 billion shares were traded on Thursday, higher than the last five sessions’ average of 6.2 billion. Decliners outpaced advancing stocks on the NYSE. For 75% stocks that declined, 22% advanced.
According to the U.S. Department of Labor, initial claims declined 8,000 for the week ending May 30 to 276,000, lower than the consensus estimate of 279,000. For the 13th straight week, claims for unemployment benefits remained below the key level of 300,000. Meanwhile, the 4-week moving average increased 2,750 from previous week’s level to 274,750.
Decline in initial claims raised concerns that the Federal Reserve might hike federal funds rates sooner than later. The Fed has kept short-term interest rates near zero since Dec 2008. Jobless claims data came in ahead of the much awaited nonfarm payroll report, which will release today.
Continuing uncertainty over a deal between Greece and its creditors also added to investor concern. Greece delayed its debt payments to the International Monetary Fund (IMF), due on Friday. IMF chief spokesman Gerry Rice said: “The Greek authorities have informed the Fund today that they plan to bundle the country’s four June payments into one, which is now due on June 30”. IMF rule allows Greece to bundle its loan repayments into one payment and pay later in the month. Greece needs to pay about 1.5 billion euros this month, including 303.3 million euros due on Friday.
Additionally, German Chancellor Angela Merkel said that cash-for-reforms deal between Greece and its lenders were still far from an agreement. She said: “The talks are ongoing, possibly with high intensity”. She added: “But they are still far from having arrived at a conclusion”. Her statement came in a day after Greece’s creditors gave signs they were ready to compromise on the debt agreement to protect Greece from defaulting.
Meanwhile, IMF’s commented that the Fed should hold off raising interest rates until the first half of next year. IMF warned that “Raising rates too soon could trigger a greater than expected tightening of financial conditions or a bout of financial instability, causing the economy to stall”. IMF said the Fed shouldn’t hike interest rates until there is “more tangible signs” of a pickup in inflation and wages.
IMF Managing Director Christine Lagarde said that inflation won’t be able to touch the Fed’s target rate of 2% until mid-2017. Her comments came in contrast to 15 out of 17 Federal Reserve officials’ opinion to raise rates this year. Fed Chairwoman Janet Yellen had said the central bank may raise interest rates this year as she believes soft economic data will not have a lasting effect on the economy.
The IMF has also trimmed U.S. economic growth to 2.5% for this year from April’s forecast of 3.1%. Decline in first quarter GDP report compelled IMF to cut growth forecast. The first quarter output of goods and services had decreased at an annual rate of 0.7%.
Thursday’s losses were broad based with all 10 sectors of the S&P 500 ending in the red. The Energy Select Sector SPDR (XLE) dropped 1.4%, the highest among the S&P 500 sectors. Dow components Exxon Mobil Corporation (XOM – Analyst Report) and Chevron Corporation (CVX – Analyst Report) declined 0.9% and 0.8%, respectively. Key stocks from the energy sector including Kinder Morgan, Inc. (KMI – Analyst Report), Schlumberger Limited (SLB – Analyst Report) and ConocoPhillips (COP – Analyst Report) decreased 1.9%, 1.4% and 1.3%, respectively.
The SPDR S&P Homebuilders ETF (XHB) declined 1.2% and was the second biggest loser among the S&P 500 sectors. Key holdings including KB Home (KBH – Analyst Report), Beazer Homes USA Inc. (BZH – Snapshot Report), Ryland Group Inc. (RYL – Snapshot Report), Toll Brothers Inc. (TOL – Analyst Report) and The Home Depot, Inc. (HD – Analyst Report) decreased 0.1%, 1.8%, 1.5%, 1.1% and 1.5%, respectively.
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Stock Market News for June 05, 2015 – June 5, 2015 – Zacks.com
