Markets ended in the red as geopolitical tensions in Ukraine and Middle East offset upbeat earnings and weekly jobs data. Decelerating growth in European economy also dented investor sentiment. After adding almost 61 points in the initial hours, the Dow declined to its lowest level since April. The Standard & Poor 500 (S&P 500) has now declined 3.9% from the record high achieved on Jul 24.
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.V) declined 0.5%, to close at 16,368.27. The S&P 500 declined 0.6% to close at 1,909.57. The tech-laden Nasdaq Composite Index closed at 4,334.97; declining 0.5%. The fear-gauge CBOE Volatility Index (:VIX) rose 1.8% to settle at 16.66. A total of 5.5 billion shares were traded yesterday, lower than last five day’s average of 6.9 billion. Decliners outpaced advancing stocks on the NYSE. For 52% stocks that declined, 45% advanced.
On Thursday, NATO Secretary General Anders Fogh Rasmussen and Ukrainian Prime Minister Arseny Yatseniuk dicussed a potential alliance to support Ukraine in its conflict with pro-Russian separatists. The secretary demanded that Russia should withdraw its troops from its border with Ukraine and discontinue support to rebels. A NATO trust fund may be set up to support Kiev’s command and control abilities, communications and cyber defence.
In retaliation to the Western sanctions, Russia is likely to impose certain import bans on goods from the Western countries. These bans include restrictions against all food imports from the U.S. and all fruits and vegetables import from Europe. Investors were also concerned about the escalating Russia-Ukraine tension. On Wednesday NATO reported that around 20,000 Russian armed troops have gathered along the eastern border of Ukraine; increasing the possibility of a Russian invasion.
Separately, tensions from the Middle East also kept investors jittery. Reportedly, the US is contemplating airstrikes against the Islamic State in Iraq and Syria (ISIS). However, the U.S. is also planning airdrop of food and medicine for around 40,000 religious minorities, struggling to survive extreme conditions on the top of Mount Sinjar.
Discouraging economic reports from Italy, Germany and United Kingdom continued to affect investor sentiment. Meanwhile, European Central Bank President Mario Draghi said on Thursday that the Russia-Ukraine tension may be a roadblock for the economic recovery in Europe.
Markets had opened higher following encouraging initial claims numbers. According to the U.S. Department of Labor, jobless claims declined in the week ending Aug 2 to 289,000 from the previous week’s revised level of 303,000. This was lower significantly than consensus estimate of 310,000. The 4-week moving average declined to 293,500 from 297,500 in the previous week. The 4-week average reached the lowest level since Feb 25, 2006.
On the earnings front, Twenty-First Century Fox, Inc. (FOXA) reported fourth quarter fiscal 2014 adjusted earnings of 42 cents per share, beating the Zacks Consensus Estimate of 38 cents. Strong box office collection and steady rise in affiliate fees helped the earnings increase nearly 35.5% year over year. Twenty-First Century Fox was the biggest gainer among the S&P 500 companies after gaining 5% on Thursday.
Shares of Duke Energy Corporation (DUK) rose 1.1% after posting adjusted second quarter 2014 earnings of $1.11 per share, ahead of the Zacks Consensus Estimate by 11%. Quarterly earnings also increased 27.6% from the year-ago figure of 87 cents.
Robust earnings from Duke Energy helped the Utilities Select Sector SPDR (XLU) gain the most among S&P 500 sectors. The company gained 1.2% yesterday. Key utilities stocks from the sector such as Ameren Corporation (AEE), DTE Energy Company (DTE), Southern Company (SO) and Entergy Corporation (ETR) increased 1.1%, 1.4%, 1.1% and 1.1%, respectively.
Mylan, Inc.’s (MYL) shares declined 3% after announcing second quarter 2014 earnings (excluding special items) of 69 cents per share, missing the Zacks Consensus Estimate by a penny. The drug company also reported second quarter revenues of $1.84 billion, marginally short of the Zacks Consensus Estimate of $1.9 billion. The company expects adjusted earnings per share in the band of 90 cents to 95 cents in the third quarter of 2014. The guidance is below the Zacks Consensus Estimate of $1.04.
Mylan’s discouraging earnings results had a negative impact on the Health Care Select Sector SPDR ETF (XLV). The sector was the biggest loser among the S&P 500 sectors after it declined 1.3%. Key healthcare stocks from the sector such as UnitedHealth Group Incorporated (UNH), Pfizer Inc. (PFE), Cigna Corp. (CI) and Humana Inc. (HUM) decreased 2.8%, 0.9%, 3% and 3.4%, respectively.
Read the analyst report on FOXA
Read the analyst report on DUK
Read the analyst report on AEE
Read the analyst report on DTE
Read the analyst report on SO
Read the analyst report on ETR
Read the analyst report on MYL
Read the analyst report on UNH
Read the analyst report on PFE
Read the analyst report on CI
Read the analyst report on HUM
Zacks Investment Research