Stock Market News for March 09, 2016

Zacks Equity Research

Updated Wed, Mar 9, 2016, 10:10 AM

Benchmarks broke five-day winning streak to close in the red on Tuesday following decline in oil prices and China’s disappointing trade data. Discouraging comments from Kuwait’s oil minister Anas Al-Saleh and U.S. Energy Information Administration (EIA) unfavorable forecast had a negative impact on oil prices, which in turn weighed on energy stocks. The S&P 500 fell below its resistance level.

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) decreased more than 0.6%, or 109.85 points, to close at 16,964.10. The S&P 500 fell 1.1% to close at 1,979.26. The tech-laden Nasdaq Composite Index closed at 4,648.83, losing 1.3%. The fear-gauge CBOE Volatility Index (VIX) increased 7.6% to settle at 18.67. A total of around 8.5 billion shares were traded on Monday, lower than the last 20-session average of 8.77 billion shares. Decliners outpaced advancing stocks on the NYSE. For 74% stocks that declined, 24% advanced.

After climbing above psychological level of 2000 points on Monday, the S&P 500 slumped almost 23 points to finish lower yesterday. Also, the Dow fell below 17,000 by almost 110 points.

According to General Administration of Customs, China’s exports fell 25.4% year-over-year in February, its biggest percentage fall since May 2009. Plunge in February’s exports was higher than January’s decline of 11.2%. Further, imports slumped 13.8% in February from the year-ago period, compared to a drop of 18.8% in January.

Moreover, China’s trade surplus slumped from $63.29 billion in January to $32.59 billion in February. The decline in trade surplus was led by a fall in exports for the eight straight month. This has raised concerns about a longer economic slowdown in China.

Additionally, oil prices declined on Tuesday following rising fears over slow demand and increase in crude supply. China-led global growth worries increased concerns regarding decline in oil demand. Moreover, Kuwait’s oil minister Anas Al-Saleh said that the country “will commit to an oil production freeze deal only if all major producers including Iran agreed."

Meanwhile, Goldman Sachs (GS) also said that crude price at $40 a barrel seemed to be unsustainable and prices would have to fall in order for a rebound to take place in 2016’s second quarter. In this context, the bank said “energy needs lower prices...to finish the rebalancing process; otherwise, an oil price rally will prove self-defeating as it did last spring.”

Further, discouraging estimates from the U.S. Energy Information Administration (EIA) also weighed on crude prices. EIA reduced WTI crude price estimate for 2016 from $37.59 a barrel to $34.04 per barrel and from $50 a barrel to $40.09 per barrel for 2017. As a result, WTI crude price decreased 3.8% to $36.50 per barrel in Tuesday, its worst percentage fall since Feb 11. Brent crude also declined 3% to $39.65.

The Energy Select Sector SPDR (XLE) decreased 4.2% and was the biggest decliner among the major S&P 500 sectors. Some of the key decliners in the Dow were Chevron Corp (CVX) and Exxon Mobil Corp (XOM), which fell 2.1% and 2.2% respectively. Other key components including, Schlumberger Ltd (SLB), EOG Resources (EOG), Occidental Petroleum Corporation (OXY), Pioneer Natural Resources Co. (PXD) and Chesapeake Energy Corporation (CHK) decreased 4.5%, 6.5%, 5.6%, 3.8% and 17.8%, respectively.

Also, the Materials Select Sector SPDR ETF (XLB) slumped nearly 2% and was the second biggest decliner among the S&P 500 sectors. Key holdings such as Alcoa Inc. (AA), LyondellBasell Industries N.V. (LYB), E. I. du Pont de Nemours and Company (DD) and The Dow Chemical Company (DOW) decreased 7.1%, 4.3%, 1.8% and 1.9%, respectively.

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Stock Market News for March 09, 2016

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