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Benchmarks finished in the red on Friday, dragged down primarily by financials as investors remained focus on the upcoming corporate earnings reports to justify the market’s lofty valuations. Meanwhile, U.S. oil prices finished slightly higheron Friday in spite of record increase in oil production, which eventually placed pressure on energy stocks.
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 20,663.22. The S&P 500 fell 0.2% to close at 2,362.72. The tech-laden Nasdaq Composite Index, meantime, closed at 5,911.74, declining 2.61 points. The fear-gauge CBOE Volatility Index (VIX) gained 7.2% to settle at 12.37. A total of around 6.4 billion shares were traded on Friday lower than the last 20-session average of 6.8 billion shares. Advancers outpaced declining stocks on the NYSE. For 57% stocks that advanced, 39% declined.
Financials Dragged the Benchmarks
The failure to pass the healthcare bill through the House of Representatives has raised questions about the Trump administration’s ability to implement his pro-growth agenda, including tax cuts. This change in investor expectations negatively impacted bank stocks which eventually had a negative effect on financial stocks.
In March, Fed raised key interest rates for the first time this year and intends to increase rates two times further. Investors were anticipating at least three more rate hikes but this relatively conservative stance on rate hike outlook by the central bank adversely impacted investor sentiment which had a negative impact on financial stocks.
Some of the key holdings of the financial sector in S&P 500 including JPMorgan Chase JPM and Wells Fargo & Co WFC declined by 1.3% and 1.0% respectively. The broader Financial Select Sector SPDR (XLF) decreased 0.8% and was the biggest decliner among the S&P 500 sectors. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Oil prices gain
Oil prices rose on Friday amid OPEC’s attempt to control oil supply. While OPEC members agreed to continue cut in oil supply, U.S. shale oil production has increased. As per Baker Hughes active U.S. oil rigs rose to 662, an increase of 300 year over year. WTI crude prices rose by 0.5% to $50.60 a barrel.
Increase in U.S. oil production raised concerns among investors about the persistent crude oversupply in the global market. This record increase in crude inventories had an adverse impact on energy shares which emerged as one of the worst performing sectors in the S&P 500.
The Energy Select Sector SPDR (XLE) decreased 0.3%. Some of its key holdings, including Exxon Mobil Corp XOM and Chevron Corporation CVX dropped 2.0% and 0.4%, respectively.
For the month, the Dow and S&P 500 declined by 0.7% and 0.8% respectively. In contrast, the Nasdaq posted a 1.5% increased. The first-quarter rally slowed down this month, after Trump’s presidency took a hit following the failure to secure adequate votes to pass a Republican-led Healthcare bill through the House of Representatives. A relatively conservative stance on rate hike outlook from the central bank also kept financials in check.
For the quarter, the Dow and Nasdaq gained 4.5% and 9.8%, respectively. The S&P 500 recorded a gain of 5.5%, its strongest first-quarter performance since 2013. Benchmarks ended in the green for the quarter, backed by a Trump-led rally. However, U.S. oil prices recorded its worst quarterly loss of 5.7% since late 2015, pressured by oversupply of crude in the global market. Over the quarter, technology has emerged as the top-performing S&P sector, up 12.2%, while energy ended as the weakest, down 7.7%.
Stocks that made Headlines
PetroChina Wraps Up 2016 with Record Low Earnings
Chinese energy giant PetroChina Co. Ltd. PTR announced 2016 earnings of RMB 7,900 million or RMB 0.04 per diluted share – the lowest on record –compared with RMB 35,653 million or RMB 0.19 per diluted share a year earlier. (Read More)
Tesla Reports Record Deliveries in the First Quarter
Tesla, Inc. TSLA has reported record quarterly deliveries for the first quarter of 2017, up about 69% year over year. (Read More)