dothedd
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Post by dothedd on Jan 5, 2015 21:24:17 GMT -5
U.S. stocks suffer largest loss in 3 months
By Anora Mahmudova and Carla Mozee
Published: Jan 5, 2015 4:18 p.m. ET
WTI oil futures fall bellow $50 a barrel
Bloomberg News
An oil tanker loads up with Iraqi crude oil at Al Basra oil terminal.
NEW YORK (MarketWatch) — U.S. stocks were clobbered Monday in an indiscriminate sell-off triggered by a renewed plunge in crude oil prices and surging dollar, which left the Dow and the S&P with their worst losses since October.
The S&P 500 SPX, -1.83% closed off session lows but still suffered its largest one-day decline in three months. The index also suffered its longest losing streak in a 12-month period, falling for the fourth-straight session. The benchmark index lost 37.62 points, or 1.8%, to 2,020.58.
The Dow Jones Industrial Average DJIA, -1.86% also had its worst down day since October, with 28 of its 30 components closing with losses. The blue-chip index dropped 331.34 points, or 1.9%, to 17,501.65.
The Nasdaq Composite COMP, -1.57% shed 74.24 points, or 1.6%, to 4,652.57, while Russell 2000 RUT, -1.46% closed down preliminary 15 points, or 1.3%, to 1,183.
Meanwhile, the 10-year Treasurys rose, sending yields down seven basis points to 2.03%, implying that investors were seeking safety in U.S. government bonds. Yields move inversely to bond prices.
A dearth of data early in the week puts the spotlight squarely on oil, which has fallen more than 5% Monday. Trading in the euro, which has dropped to a nearly nine-year low against the dollar, also has drawn investors’ attention.
Despite the dour message being issued by stocks early in the new year, some analyst appeared to be nonplussed by the dramatic down swing early in the trading year.
Brian A. Fenske, head of sales trading at ITG, independent broker based in New York, said equity investors get nervous when oil prices move up or down quickly, but cautioned not to read too much into a one-day move.
“In the absence of company-specific news, macro headlines will affect stock markets, and news around euro stability and falling oil prices as well as recent levels of bullishness are the reason we are seeing a pullback,” he added.
Indeed, the CBOE Vix index, measuring implied nervousness in stocks on the S&P 500, jumped 14% to above 20. Every 10% move on the Wall Street’s fear gauge has been associated with a 1% move in the index.
Eric Scott Hunsader, founder of Nanex, pointed that today’s trading action was unusual as investors were caught off guard by oil dropping below $50 a barrel.
“Stock investors did expect oil to fall below $60 a barrel, but oil dropped below $50 too quickly and caught people off guard triggering selling,” Hunsader said.
“Out of 100 most-traded stocks today, 81 were down more than 1% and 32 more than 5%. It was not as much a panic selling, as lack of interest from buyers,” Hunsader added.
Richard Peterson, senior director at S&P Capital IQ, said that volatility in the market is expected, but remains optimistic in the longer term.
“Markets are more on a pause than retreat as concerns over euro and oil have taken over fundamentals for now. We still expect 11% fourth-quarter earnings growth for the S&P 500 companies excluding energy sector, which will drive markets higher,” Peterson added.
Euro sinks to nine-year low against dollar (3:58)
The euro tumbled to a nine-year low against the highflying dollar on Monday, struck by nerves over Greek politics and expectations that the European Central Bank will beef up its stimulus program.
Oil and the S&P 500: In turn, a rise in the dollar DXY, -0.08% was weighing on dollar-denominated commodities such as oil, with oil futures CLG5, +0.36% LCOG5, +0.32% down more than 5%, trading at prices not seen since mid-2009. Energy stocks sold off and were among the worst performers on the S&P 500 as oil prices — which have dropped about 50% since June — struggle to find a bottom.
Noble Energy, Inc NBL, -9.58% , Diamond Offshore, Drilling Inc DO, -8.70% and Anadarko Petroleum Corp APC, -7.89% closed with hefty losses, falling more than 7%.
Energy sector, the worst-performing sector in 2014 on the S&P 500, dropped 4% on Monday. Read: Here’s who been hurt the most by the oil-price slide.
Revenue and capital expenditure plans by energy companies “have been and will continue to be slashed,” as a result of the oil-price drop, said Goldman Sachs analysts in a note. The positive impact of lower oil prices on profit for non-energy companies is more difficult to quantify, said Goldman, but its model indicates that every shift of $10 a barrel in oil prices translates into about $2 a share for S&P 500 index per-share earnings. They expect Brent crude to average $84 a barrel in 2015.
“Simply put, reduced energy company earnings are more than offset by higher revenues and margins for many other areas of the market,” said Goldman analysts.
Positioning before the release of December U.S. nonfarm-payrolls numbers on Friday is seen as driving the market’s direction this week, overshadowing minutes from Federal Reserve’s most recent meeting, due Wednesday, and service-sector data, due Tuesday. Analysts surveyed by MarketWatch expect another 215,000 jobs were added last month, and the unemployment rate may decline to 5.7%.
Stocks to Watch: Caterpillar Inc. CAT, -5.28% was the Dow Jones Industrial Average’s biggest loser, falling 5.3%, after J.P. Morgan analysts lowered their rating for the stock to underweight, citing concerns about Caterpillar’s direct exposure to oil and gas and indirect exposure to mining, U.S. construction and emerging markets.
Ford Motor Co. F, -3.91% and General Motors Co. GM, -1.46% shares were hit on Monday, falling 3.9% and 1.5% respectively, in spite of strong December sales figures. In the case of Ford, the rise in sales was less than expected.
Cempra lnc. CEMP, +7.25% shares jumped 7.3% following positive results from a late-stage trial of the oral version of its solithromycin antibiotic.
Boston Scientific Corp BSX, +4.46% shares rose 4.5% after J.P. Morgan upgraded the stock to overweight from neutral after it lagged peers in 2014.
For more on today’s notable movers, read Movers & Shakers column.
Other markets: The euro’s drop to fresh multiyear lows came after a Der Spiegel magazine report that Germany is cooling on its commitment to preventing Greece from exiting the eurozone, though Berlin officials later insisted the German government expects Greece to stay with the shared currency. Read: Leading economist warns of devastating turmoil if Greece leaves the eurozone.
In Asia, mainland Chinese stocks SHCOMP, +0.05% rallied to their highest close in more than five years, but Japan’s Nikkei Average NIK, -2.30% slipped 0.2%. European stocks SXXP, -2.15% swayed between gains and losses. Gold futures GCG5, +0.06% gained ground.
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