Stock Market News for January 02, 2015 - Market News
Markets ended in the red zone on the last trading day of 2014 as disappointing economic data dented investor sentiment. Moreover, another decline in oil prices also weighed on energy shares on Wednesday. However, major benchmarks finished in positive territory in December and for 2014. The S&P 500 and Nasdaq witnessed their third-consecutive annual gains. The Dow also registered the same for the sixth-straight year. The S&P 500 recorded 53 record highs in 2014, while the blue-chip index hit record highs 38 times this year.
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The Dow Jones Industrial Average (DJI) declined 0.9%, or 160 points, to close at 17,823.07. The Standard & Poor 500 (S&P 500) lost more than 1% to close at 2,058.90. The tech-laden Nasdaq Composite Index closed at 4,736.05; declining 0.9%. The fear-gauge CBOE Volatility Index (VIX) jumped 20.6% to settle at 19.20. A total of about 5.21 billion shares were traded on Wednesday, below monthly average of 6.95 billion. Decliners outpaced advancing stocks on the NYSE. For 63% stocks that declined, 35% advanced.
On Wednesday, the U.S. Department of Labor reported that jobless claims increased in the week ending Dec 27 to 298,000 from previous week’s number of 281,000, higher than the consensus estimate of 293,000. Initial claims numbers rose to the highest level since the Thanksgiving week.
Meanwhile, the Chicago PMI business index declined 2.5 points to 58.3 in December, missing the consensus estimate of 60.1. The reading indicated that growth in business activity in this year slowed down in December. However, the reading also signaled that business activity is expanding at a steady pace in this area. Moreover, 2014 was the best year for the index in the last three years.
However, the National Association of Realtors reported that the Pending Home Sales Index gained 0.8% in November to 104.8, preceded by 1.1% decline in October. The rate of growth was also above the consensus estimate of 0.5% rise. It was also reported that the index rose 4.1% year over year in November, registering its highest year-on-year gain since Aug 2013.
Encouraging pending home sales data had a positive impact on the SPDR S&P Homebuilders (XHB). The sector gained 0.4% on Wednesday and was the only gainer among the S&P 500 sectors. Key homebuilder stocks including Toll Brothers Inc. (TOL), DR Horton Inc. (DHI), Lennar Corp. (LEN) and PulteGroup, Inc. (PHM) gained 2.9%, 1.4%, 0.8% and 0.7%, respectively.
Meanwhile, the Utilities Select Sector SPDR (XLU) declined for the second-straight day. The sector lost 1.8% and was the worst performer among the S&P 500 sectors on Wednesday. Key utilities stocks including Duke Energy Corporation (DUK), The AES Corporation (AES), Southern Company (SO), Dominion Resources, Inc. (D) and Exelon Corporation (EXC) declined 1.4%, 1.8%, 1.3%, 1.8% and 2.7%, respectively.
Moreover, oil prices slumped again, dragging energy shares down on Wednesday. The prices of WTI crude oil and Brent crude oil declined 1.6% and 1% to $53.27 per barrel and $57.33 a barrel, respectively. Key energy stocks including Schlumberger Limited (SLB), Chesapeake Energy Corporation (CHK), Chevron Corporation (CVX) and Exxon Mobil Corporation (XOM) lost 1.2%, 0.4%, 0.8% and 0.6%, respectively.
Benchmarks finished in the green in December banking on encouraging domestic economic data including an impressive third quarter GDP report. The Dow, S&P 500 and Nasdaq gained 0.3%, 0.3% and 0.2%, respectively.
According to the “third” estimate by the Bureau of Economic Analysis, third quarter GDP increased at an annual rate of 5%, more than the consensus estimate of an increase by 4.3%. Moreover, economic data including retail sales, consumer confidence and initial claims numbers were encouraging. The Fed’s decision to remain more “patient” before hiking the rates and its dovish outlook on the economy also encouraged investors.
However, disappointing international news including the slump in Russian ruble, and disappointing data out of China and the Eurozone eroded some of the gains. Moreover, decline in oil prices throughout the month also dragged down energy shares. Meanwhile, renewed political turmoil in Greece resulting in the dissolution of its parliament also weighed on investor sentiment. Trading volumes were also low in the second half of the month.
In 2014, all the major benchmarks posted solid gains banking on an overall positive economic scenario in the U.S. The Dow, S&P 500 and Nasdaq gained 7.5%, 11.4% and 13.4%, respectively in the year. The S&P 500 has gained 64% in the last three years.
The domestic economy has outperformed the key global economies for a major part of the year. Majority of economic data including GDP and labor market reports were encouraging. The GDP number gradually recovered from the 2.9% contraction in the first quarter to 5% growth in the third quarter. Moreover, the economy added more than 200,000 jobs for 10 consecutive months in November, the longest stretch in more than 30 years. From 6.6% in January, the unemployment rate gradually declined to a six-year low of 5.8% in November.
Recovery in the overall economic environment allowed the US Federal Reserve to terminate the third round of bond repurchases. In a recently released statement, the Fed decided to be “patient” before hiking rates. For the major part of the year, the Fed continued to assure that the interest rate will remain at near-zero level for “considerable time.” The latest statement helped the benchmarks to register best gains in 2014.
However, global economy had gone through troubled times all through the year. The Russia-Ukraine crisis, which resulted into series of sanctions against Russia, increased geopolitical tensions at the beginning of the year. The crisis was followed by violence in the Middle East. Moreover, major economies which include the Eurozone, China and Japan continued to dampen investor sentiment by providing dismal economic data throughout the year. Meanwhile, negative trend in oil prices remained one of the main concerns in 2014. Oil price declined below $60 per barrel, dropping to a five-year low.
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