Stock Market News for May 20, 2015 – Zacks Investment Research

Benchmarks finished mixed on Tuesday after positive housing numbers raised investor concerns about the timing of a rate hike. Housing starts soared to their highest level in almost seven and a half years in April. While the Dow closed at a record level for the second consecutive session, the S&P 500 and the Nasdaq ended in the red.

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The Dow Jones Industrial Average (DJI) gained 0.1% to close at 18,312.39. The Standard & Poor’s 500 (S&P 500) decreased 0.1% to 2,127.83. The tech-laden Nasdaq Composite Index closed at 5,070.03; declining 0.2%. The fear-gauge CBOE Volatility Index (VIX) went up 0.9% to settle at 12.85. A total of about 5.9 billion shares were traded on Tuesday, lower than this months’ average of 6.3 billion. Decliners outpaced advancing stocks on the NYSE. For 58% stocks that declined, 39% advanced.

The U.S. Department of Commerce reported that privately-owned housing starts surged 20.2% to 1,135,000 in April from March’s revised tally of 944,000. This was also more than the consensus estimate of 1,022,000. Construction on new homes climbed at the fastest pace in April since late 2007, banking on rise in single-family housing starts. Single-family housing starts gained 14.9% in April to 733,000 from March’s revised figure of 628,000. The pace of permits for single-family homes also hit the fastest rate since early 2008. Separately, building permits increased at a rate of 10.1% in April to 1,143,000, more than the consensus estimate of an increase to 1,062,000.

While positive housing report made some investors believe that the economy may be gaining momentum from a slow first quarter, others were concerned as to what effect this report will have on the Federal Reserve’s interest rate policy. On Monday, a drop in NAHB/Wells Fargo Housing Market index in April had increased expectations that the Federal Reserve may delay hiking interest rates in the near term. The decline in homebuilder’s confidence comes after mixed economic data last week gave no clear indication on the timing of a rate hike.

Nevertheless, the SPDR S&P Homebuilders ETF (XHB) advanced 0.61% and was the biggest gainer among the S&P 500 sectors. Key holdings including KB Home (KBH – Analyst Report), Beazer Homes USA Inc. (BZH – Snapshot Report) and Ryland Group Inc. (RYL – Snapshot Report) increased 2.4%, 1.5% and 1.5%, respectively.

Bond prices declined following promising housing starts report. Drop in bond prices pushed bond yields higher. The benchmark U.S. 10-year Treasury note increased to 2.262% on Tuesday from 2.228% on Monday. Rise in bond yields boosted financial stocks. The Financial Select Sector SPDR (XLF) gained 0.56%, the second highest among the S&P 500 sectors. Top holdings from the sector such as Wells Fargo & Company ( (WFC – Analyst Report), JPMorgan Chase & Co. (JPM – Analyst Report), Berkshire Hathaway Inc. (BRK.B – Analyst Report), Bank of America Corporation ( (BAC – Analyst Report) and Citigroup Inc. (C – Analyst Report) increased 1.2%, 0.9%, 0.5%, 1.6% and 1.2%, respectively.

Meanwhile, shares of Wal-Mart Stores Inc. (WMT – Analyst Report) dropped 4.4% after the company’s fiscal first quarter 2016 revenues of $114.8 billion missed the Zacks Consensus Estimate of $116.3 billion. Another retailer, The Home Depot, Inc. ( (HD – Analyst Report) posted first-quarter fiscal 2015 earnings of $1.16 per share that beat the Zacks Consensus Estimate of $1.15. However, shares of the home improvement retailer declined 1.7%.

Including these reports, 28 of the 41 retailers in the S&P 500 index have reported first quarter earnings results so far. Among the 28, earnings are up 2.3% on 6.3% higher revenues, with 78.6% beating earnings per share estimates and 46.4% coming ahead of top-line expectations.

Meanwhile, energy sector lagged the most among the S&P 500 sectors. Energy shares fell after oil prices declined on evidence of abundant supply of oil in the Middle East region. A stronger dollar also had a negative impact on oil prices. The dollar strengthened against the euro in the wake of the European Central Bank executive board member Benoît Coeuré comments that the apex bank will step up its asset purchasing program in the upcoming weeks. WTI crude oil declined 3.8% to $57.26 per barrel. Additionally, Brent crude oil dropped 3.5% to $64.02 per barrel.

The Energy Select Sector SPDR (XLE) fell 1.4%. Key stocks from the energy sector, Chevron Corporation (CVX – Analyst Report), Schlumberger Limited (SLB – Analyst Report) and ConocoPhillips ( COP) decreased 1.5%, 2.4% and 1.4%, respectively. Overall, 6 out of 10 sectors of the S&P 500 ended in the red.

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Stock Market News for May 20, 2015 – Zacks Investment Research