Stock Market News for February 09, 2016
Benchmarks ended in the red following a slump in financial and material stocks. Financial stocks took a beating due to uncertainty over the rate hike and widening credit spreads while material stocks were hammered following decline in oil prices. Separately, decline in shares of Facebook and Amazon adversely affected the Nasdaq for the second straight day. The Nasdaq closed at its lowest level since Oct 2014. The S&P 500 also touched its lowest level since Apr, 2014.
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The Dow Jones Industrial Average (DJI) declined 1.1% or 177.92 points, to close at 16,027.05. The Standard & Poor’s 500 (S&P 500) decreased 1.4% to close at 1,853.44. The tech-laden Nasdaq Composite Index closed at 4,283.75, falling 1.8%. The fear-gauge CBOE Volatility Index (VIX) increased 11.2%, to settle at 26. A total of around 10.6 billion shares were traded on Monday, higher than the last 20-session average of 9.4 billion. Decliners outpaced advancing stocks on the NYSE. For 79% stocks that declined, only 20% advanced.
Selloff in European banks had a negative impact on the broader markets. The Stoxx Europe 600 Banks Index (FX7) fell 5.6% and registered losses for the sixth consecutive week, its longest weekly loss since 2008. Negative interest rates and poor profit margins forced investors to sell banking stocks.
In U.S., uncertainty about a rate hike in the near term due to weak domestic economic data and continuous plunge in global oil prices dragged financial stocks down. Higher interest rates generally help banks to improve their interest spread.
The Financials Select Sector SPDR (XLF) lost 2.5% and was the second biggest loser among the S&P 500 sectors. Top holdings from the sector such as Wells Fargo & Company (WFC), JPMorgan Chase & Co. (JPM), Bank of America Corporation (BAC), Goldman Sachs Group, Inc. (GS) and Morgan Stanley (MS) decreased 2.8%, 2.1%, 5.3%, 4.6% and 6.9% respectively.
Meanwhile, oil price continued to fall for the third consecutive trading day due to persistent fears about global supply glut. Further, Venezuela failed to convince Saudi Arabia to trim oil production levels on Sunday. While the WTI crude slumped 4% to $29.69 per barrel, Brent crude fell 3.6% to $32.88 a barrel.
Drop in oil prices weighed on materials sector. The Materials Select Sector SPDR ETF (XLB) declined 2.6%, the highest loser among the S&P 500 sectors. Key holdings such as The Dow Chemical Company (DOW), E. I. du Pont de Nemours and Company (DD), Monsanto Company (MON), Ecolab Inc. (ECL) and LyondellBasell Industries N.V. (LYB) decreased 1%, 1.3%, 3.5%, 2.4% and 5.1% respectively. Overall, all the S&P 500 sectors ended in the red.
Separately, the Nasdaq was dragged down by decline in Facebook Inc. (FB) and Amazon.com Inc. (AMZN). Shares of Facebook and Amazon dropped 4.2% and 2.8%, respectively.
Investors took money out of equity markets and invested them in safe haven assets like gold and treasury notes. The price of gold futures reached almost $1200 per ounce yesterday, its highest since mid-June. Rising fears over slow economic growth resulted in increase in demand for gold.
Meanwhile, treasury yield touched a 12-month low, whereas, treasury prices increased for the third successive trading day. Treasury yield plunged to 1.736%, its largest intra-day decline since July 6, 2015.
In earnings news, shares of Cognizant Technology Solutions Corp. (CTSH) fell 7.7% after its fourth-quarter revenues of $3.23 billion fell short of the Zacks Consensus Estimate of $3.24 billion. However, its quarterly earnings of 74 cents per share came in ahead of the Zacks Consensus Estimate of 71 cents.
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