Benchmarks finished in negative territory on Tuesday, dragged down primarily by decline in energy shares. Oil prices declined to a nine month low in the backdrop of global glut in crude production as major oil producing countries increased crude output. Tech shares continued to decline as investors remained concerned about valuation. Additionally, investors remained focused on the outcome of the special election for Georgia’s sixth Congressional district. Meanwhile, investors kept a close watch on comments made by Federal Reserve officials.
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 21,467.14. The S&P 500 fell 0.7% to close at 2,437.03. The tech-heavy Nasdaq Composite Index declined 0.8% to finish at 6,188.03. The Dow, the S&P 500 and Nasdaq have advanced 8.6%, 8.9% and 15% respectively on a year to date basis. A total of around 7.1 billion shares were traded on Tuesday, lower than the last 20-session average of 6.9 billion shares. Decliners outnumbered advancing stocks on the NYSE by a 2.48 to 1 ratio.
Oil Prices Hit Seven-Month Low
Oil prices suffered another setback on Tuesday, posting its weakest close since mid September last year. Oil prices reached its bear-market territory as increase in crude production from the United States, Libya and Nigeria exacerbated the global glut in its supply. Further, investors remained worried about whether the increase in production would neutralize the effects of output cuts by OPEC.
Libya has increased production by close to 900,000 barrels per day (bpd), after resolving a conflict with Germany’s largest crude oil and natural gas producer, Wintershall. Moreover, the rise in U.S. output has added further pressure to oil prices . The International Energy Agency predicted that non-OPEC output would increase to 59.7 million bpd in the coming year. It also projected US output to exceed 14.1 million bpd.
Additionally, Nigeria has increased exports of Bonny Light crude. Production for the country is about to reach 226,000 bpd in August, an increase from 164,000 bpd in July.
WTI crude prices declined by $0.97, or 2.2%, to $43.23 a barrel. The broader Energy Select Sector SPDR (XLE) fell 1.3%, emerging as the worst performing sector of S&P 500. Some of its key holdings, including Verizon Communication Inc. VZ and Chevron Corp CVX fell 1.4% and 0.9% respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
Tech Shares Continue to Decline
Technology shares fell on Tuesday, as investors remained concerned about overvaluation. The tech-heavy Nasdaq-100 ETF PowerShares QQQ Trust (QQQ) lost over 3.1% and tech behemoth Technology Select Sector SPDR Fund (XLK) dropped 3.3% in the last five days (as of June 15, 2017). The broader Technology Select Sector SPDR (XLK) fell 0.8%. Some of its key holdings including Apple AAPL and Microsoft Corp MSFT decreased 0.9% and 1.4% respectively.
Georgia’s Special Election
Investors kept a close watch on the outcome of the special election for Georgia’s sixth congressional district. President Trump on Tuesday morning tweeted “vote now for Karen H,” in favor of Republican Karen Handel who is contesting Democrat Jon Ossoff. Trump commented that Democrats tried to “stop tax cuts, good health care and border security”.
Fed Officials Comments
Meanwhile, investors digested several comments from Federal Reserve speakers on Tuesday. Boston Fed President Eric Rosengren on Tuesday expressed his concerns over low interest rates by saying that low interest rates affect financial stability.
Additionally, on Monday at New York University, Chicago Fed President Charles Evans raised concerns over prevailing levels of inflation and favored gradual monetary tightening.
Meanwhile, New York Federal Reserve President William Dudley on Monday had expressed concern over the prevailing level of inflation. However, Dudley added that prices would likely rise as wages increased.
Stocks that made Headlines
After reporting lower-than-expected earnings per share in two successive quarters, Memphis, TN-based FedEx Corporation FDX came up with an impressive performance in the fourth quarter of fiscal 2017 (ended May 31, 2017). ( Read More )
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