Stock Market News for May 26, 2015 – Zacks Investment Research

Benchmarks ended the last trading day of the week in the red following Janet Yellen’s comments that it would be appropriate to raise interest rates sometime this year. Yellen said the economy is well positioned to grow even if weak economic data had indicated the economy was not on a solid footing. Meanwhile, an increase in consumer price index raised concerns about rate hike sooner than later. While the S&P 500 and Nasdaq ended the week in the green, the Dow finished in negative territory.

For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article

The Dow Jones Industrial Average (DJI) declined 0.3% to close at 18,232.02. The Standard & Poor’s 500 (S&P 500) decreased 0.2% to 2,126.06. The tech-laden Nasdaq Composite Index closed at 5,089.36; declining a meager 0.03%. The fear-gauge CBOE Volatility Index (VIX) went up 0.2% to settle at 12.13. A total of about 2.5 billion shares were traded on the NYSE on Friday. Decliners outpaced advancing stocks on the NYSE. For 60% stocks that declined, 35% advanced.

Federal Reserve Chairwoman Janet Yellen said she expects the Fed to raise short-term interest rates sometime this year. Yellen believes the U.S. economy is well poised to grow despite soft economic data. She said: “If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal-funds rate target and begin the process of normalizing monetary policy.” Yellen added that she needs to see further improvement in labor market conditions and to be “reasonably confident” that inflation moves closer to its target rate of 2%, before deciding on when to raise rates.

Previously, the Federal Open Market Committee’s (FOMC) Apr 28-29 meeting had stated that officials opined hiking rates in June was “unlikely” as they remained concerned about weak economic growth in the first quarter. Yellen’s speech raised concerns among investors that the Fed may raise interest rates sooner than later, which eventually had a negative impact on markets.

Moreover, an increase in consumer price index added to the bearish sentiment. According to the U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers (CPI-U) gained 0.1% in April. This was in line with the consensus estimate. Excluding food and energy, the index gained 0.3% in April. Rise in housing expenses and increase in medical care costs were cited to be the reasons behind this rise in core CPI. The all-item index declined 0.2% year on year, but excluding food and energy it increased 1.8%.

Friday’s losses were broad based with 9 out of 10 sectors of the S&P 500 ending in the red. The SPDR S&P Homebuilders ETF (XHB) declined almost 0.6%, the highest loser among the S&P 500 sectors. Key holdings including Toll Brothers Inc. (TOL – Analyst Report), KB Home (KBH – Analyst Report), Beazer Homes USA Inc. (BZH – Snapshot Report) and Ryland Group Inc. (RYL – Snapshot Report) decreased 0.2%, 0.9%, 1.3% and 1.6%, respectively.

The Industrial Select Sector SPDR (XLI) declined almost 0.5% and was the second biggest loser among the S&P 500 sectors. Key holdings including 3M Company (MMM – Analyst Report), Union Pacific Corporation (UNP – Analyst Report), The Boeing Company (BA – Analyst Report) and United Technologies Corporation ( (UTX – Analyst Report) decreased 0.7%, 0.7%, 1.7% and 0.4%, respectively.

For the week, the S&P 500 and the Nasdaq gained 0.2% and 0.8%, respectively. However, the Dow declined 0.2%. Benchmarks finished mostly in the green for the week as weaker-than-expected economic reports increased expectations of a delayed rate hike. Reports on housing, manufacturing and labor market were discouraging.

Additionally, Fed minutes showed officials looked past a June rate hike amid slow economic growth. Fed Chicago President Charles Evans also recommended that the Fed should hold back from hiking interest rates until 2016. However, Yellen 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.

Separately, gains in Apple Inc.’s (AAPL – Analyst Report) shares boosted the broader markets, while the Nasdaq ended in the green helped by gains in biotech stocks. Meanwhile, Greece’s debt crisis and rise in bond yields failed to dent investor sentiment.

Original source: 

Stock Market News for May 26, 2015 – Zacks Investment Research