Benchmarks settled in the red on Monday as investors remained cautious about Israel’s ground invasion in Gaza and possible tougher sanctions against Russia. The day was devoid of any major economic data and corporate earnings results that could have impacted the markets.
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 Monday’s trading session at 17,051.73. The Standard & Poor 500 (S&P 500) dropped 0.2% to finish at 1,973.63. The tech-laden Nasdaq Composite Index closed at 4,424.70; declining almost 0.2%. The fear-gauge CBOE Volatility Index (VIX) surged 6.2% to settle at 12.81. Total volume for the day was roughly 4.91 billion shares, higher than this month’s average of 5.60 billion. Decliners outpaced advancing stocks on the NYSE. For 61% stocks that declined, 36% advanced.
Ongoing geopolitical tensions kept investors jittery on Monday. Israel stepped up its ground offensive in Gaza strip. Israel’s move came despite growing international pressure for a cease-fire. According to the Palestinian Health Ministry, the death toll in Gaza has crossed 300 in the last four days.
On Monday, seven more Israeli soldiers were killed, among whom four were killed in a raid by Hamas militants. There have been five such raids by Hamas militants in the last five days.
The US President Barack Obama said “We don't want to see any more civilians getting killed.” President Obama has sent U.S. Secretary of State John Kerry to Cairo to call for a truce between Israel and Hamas militants. He said: “I have instructed him to push for an immediate cessation of hostilities based on a return to the November 2012 cease-fire agreement between Israel and Hamas in Gaza.”
Last Thursday, Israeli Prime Minister Benjamin Netanyahu had instructed the country’s military forces to begin a ground offensive in Gaza. Residents of Gaza had reported heavy artillery and naval shelling coupled with helicopter fire along the borders of Gaza. These developments raised concerns among investors. They believe the fallout may spread to other parts of Middle East.
Investors also kept a close watch on the latest developments related to Malaysian Airline MH17 that was shot down near the Ukraine-Russian border last Thursday. President Barack Obama said Russian President Vladimir Putin has “direct responsibility” to compel separatists to allow international investigators to collect evidence from the crash site. Russian President Vladimir Putin retaliated by saying that U.S. and Europe are using this tragic incident for “selfish political gains.”
Meanwhile, fighting between Ukrainian government forces and pro-Russian separatists intensified in the city of Donetsk. President Barack Obama said he prefers a diplomatic solution to the ongoing crisis in Ukraine. He stated: “The burden is now on Russia.” He said: “Russia will only further isolate itself from the international community” and costs will “only increase” provided Russia doesn’t compel separatists to co-operate.
U.S. wants European governments to impose more sanctions on Russia. Currently, European policy makers are debating whether or not to impose tougher sanctions against Russia.
Coming back to domestic events, shares of McDonald's Corp. (MCD - Analyst Report) and Yum! Brands, Inc. (YUM - Analyst Report) dropped 1.5% and 4.3%, respectively, after the companies suspended meat purchases in China from Shanghai Husi Food Co., owned by Aurora, Illinois-based OSI Group. The meat purchases were suspended for its KFC and Pizza Hut chains across the country. The allegation was that the meat supplier sold stale chicken and beef to restaurants.
Shares of Herbalife Ltd. (HLF - Snapshot Report) plunged 11.2% after Bill Ackman, head of Pershing Square Capital Management LP; told CNBC that he will provide evidence on Tuesday that Herbalife is an “incredible fraud.”
Among major corporate earnings results, Hasbro Inc. (HAS) posted second quarter 2014 results with both earnings and revenues missing the Zacks Consensus Estimate. Adjusted earnings per share of 36 cents missed the Zacks Consensus Estimate of 37 cents by a penny. Moreover, Hasbro’s net revenue of $829.3 million increased 8.2% year over year but missed the Zacks Consensus Estimate of $843.0 million. Shares of the toymaker declined 2.7%.
These incidents weighed on consumer stocks. The Consumer Discretionary Select Sector SPDR (XLY) and The Consumer Staples Select Sector SPDR (XLP) both led the decline among the S&P 500 sectors. Both the sectors dropped almost 0.5%. Key stocks from the consumer discretionary sector such as The Walt Disney Company (DIS - Analyst Report), Comcast Corporation (CMCSA - Analyst Report), and The Home Depot, Inc. (HD - Analyst Report) decreased 0.1%, 1.3% and 0.5%, respectively.
Top holdings from the consumer staples sector such as The Procter & Gamble Company (PG - Analyst Report), The Coca-Cola Company (KO - Analyst Report) and Philip Morris International, Inc. (PM - Analyst Report) decreased 0.3%, 0.1% and 0.5%, respectively. Overall, 8 out of 10 sectors of the S&P 500 ended in the red.
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