Stock Market News for May 18, 2015 – Zacks Investment Research
Markets added modest gains on Friday amid discouraging economic data. A flurry of weaker-than-expected economic reports increased expectations that the Fed will refrain from raising interest rates in the near term, which eventually helped the S&P 500 and the Dow end marginally higher. The day’s minute gains were enough for the S&P 500 to close at a record level for the second consecutive session. However, the Nasdaq bucked the trend and ended slightly lower. Benchmarks ended a volatile week in the green.
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The Dow Jones Industrial Average (DJI) increased 0.1% to close at 18,272.56. The Standard & Poor’s 500 (S&P 500) also gained 0.1% to 2,122.73. The tech-laden Nasdaq Composite Index closed at 5,048.29; declining a meager 0.05%. The fear-gauge CBOE Volatility Index (VIX) dropped 2.8% to settle at 12.38. A total of about 5.7 billion shares were traded on Friday, lower than the last five trading days’ average of 6.2 billion. Advancers outpaced declining stocks on the NYSE. For 56% stocks that advanced, 41% declined.
Investors grappled with a slew of discouraging economic reports on Friday. The Board of Governors of the Federal Reserve System reported a fifth straight decrease in industrial production in April. Industrial production declined 0.3% in April. This compared unfavorably with the consensus forecast of industrial production remaining unchanged. A stronger dollar, lower oil prices and weak global demand for goods were cited to be reasons behind this decline in industrial production. It had also dropped 0.3% in March.
Moreover, manufacturing output was flat in April. Excluding autos, manufacturing output fell 0.1%. Separately, capacity utilization declined to 78.2%, wider than the consensus expectations of a decrease to 78.3%.
Additionally, the Empire State Manufacturing Survey Index came in at 3.1 in May, increasing from a negative 1.19 in April. However, the reading fell short of the consensus estimate of an uptrend to 5.85. The reading indicated that manufacturing activity expanded at a less-than-expected pace for New York manufacturers.
Meanwhile, preliminary reading on May’s consumer sentiment dropped to a seven-month low. The University of Michigan and Thomson Reuters’ preliminary reading of consumer sentiment was at 88.6 in May. This was less than the consensus forecast of a decrease to 95.6.
Disappointing economic reports weighed on investors sentiment. However, weaker-than-expected economic data increased expectations that the Federal Reserve won’t hike interest rates in the near term, which eventually helped benchmarks mostly end in the green.
Weak economic data helped bond prices gain on Friday. Rise in U.S. Treasury prices dragged benchmark U.S. 10-year Treasury note yields down to 2.141% on Friday from 2.235% on Thursday. Utilities stocks gained due to rise in bond prices. The Utilities Select Sector SPDR (XLU) gained 1.3%, the highest among the S&P 500 sectors. Key utilities stocks including Duke Energy Corporation (DUK – Analyst Report), Dominion Resources, Inc. (D – Snapshot Report), Exelon Corporation (EXC – Analyst Report), Southern Company (SO – Analyst Report) and PG&E Corporation (PCG – Analyst Report) increased 0.9%, 0.8%, 2.9%, 1.3% and 1.1%, respectively.
Decline in bond yields also boosted real estate stocks. The SPDR S&P Homebuilders ETF (XHB) advanced 0.81% and was the second biggest gainer 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) increased 2.6%, 2.9%, 0.4%, 1.8% and 1.3%, respectively. Overall, 7 out of 10 sectors of the S&P 500 ended in the green.
For the week, the S&P 500, the Dow and the Nasdaq gained 0.3%, 0.5% and 0.9%, respectively. Benchmarks ended in the green for the week amid mixed economic data, giving no clear indication to investors on the timing of a rate hike. While industrial production, producer price index and consumer sentiment declined, claims for unemployment benefits touched a 15-year low.
Meanwhile, drop in global bond yields helped benchmarks settle in the green. European Central Bank President Mario Draghi’s commitment to continue its asset purchasing program to stimulate Eurozone’s economy helped stocks recover while bond yields declined. Additionally, a weaker dollar boosted investor sentiment on Thursday as it increases profit margins of U.S. exporters by making their products cheaper.
Among the negatives, a drop in E. I. du Pont de Nemours and Company’s (DD – Analyst Report) shares weighed on the Dow on Wednesday. Meanwhile, investors were concerned about Greece’s debt crisis on Monday, while China’s rate cut to lift its economy failed to boost sentiment.
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Stock Market News for May 18, 2015 – Zacks Investment Research
