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Benchmarks ended in the red zone on Friday dragged by a fall in the bio-tech stocks and futures and options expiration. Investors also had to focus on the latest developments in the Crimea region. However, the indices ended the week with modest gains. 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) dropped 0.2% to close Friday’s trading session at 16,302.77. The Standard & Poor (S&P 500) fell 0.3% to finish at 1,866.52. The tech-laden Nasdaq Composite Index fell almost 1% to 4,276.79. The fear-gauge CBOE Volatility Index (VIX) went up 3.3% to settle at 15. Total volume on the US exchanges were 9.6 billion. Declining stocks were outnumbered by advancing stocks on the NYSE. For 40% stocks that declined, 57% advanced.
Benchmarks gave away all their initial gains on Friday due to a fall in the bio-tech stocks. The S&P 500 had reached a new intraday record of 1,883.97, but it failed to keep the momentum and ended in the negative territory. Gilead Sciences Inc. (NASDAQ:GILD) and Biogen Idec Inc. (NASDAQ:BIIB) were the biggest drags on the S&P 500. The two stocks plummeted 4.6% and 8.2%, respectively. The drop in the share prices of biotechnology stocks also weighed heavily on the tech-heavy Nasdaq Composite Index.
Bio-tech companies were affected after Democrats on the U.S. House Energy & Commerce Committee asked Gilead Sciences to justify the $84,000 price tag on its new hepatitis C drug Sovaldi.
The Health Care Select Sector SPDR (XLV) led the decline among the S&P 500 sectors as the sector fell 1.8%. Key stocks from the sector such as Merck & Co. Inc. (NYSE:MRK), AbbVie Inc. (NYSE:ABBV), Amgen Inc. (NASDAQ:AMGN), Bristol-Myers Squibb Company (NYSE:BMY) and UnitedHealth Group Incorporated (NYSE:UNH) dropped 1.7%, 0.4%, 3.2%, 3.2% and 0.2%, respectively.
The early gains were also erased after stocks were hit by rotations due to the quadruple witching day. The stock option contract expiration and multiple indexes rebalancing led to a volatile trading session.
On Friday, investors were kept on the edge by recent developments in the Crimea region of Ukraine. Russian President Vladimir Putin had signed laws for annexation of Crimea. This led to the US President Barack Obama approving possible future sanctions on Russian financial services, defense and energy sectors.
For the week, the S&P 500, Dow and Nasdaq gained 1.4%, 1.5% and 0.7%, respectively. Crimea’s vote to join Russia was conducted peacefully and it turned to be overwhelmingly in favor of citizens in Crimea wanting to be part of Russia. This had helped the benchmarks move up at the beginning of the week.
Encouraging domestic economic numbers were also welcomed by the investors during the week. On Monday, increase in industrial production, modest improvement in general business conditions in New York State and gain in homebuilders’ confidence were cheered by the investors. On Thursday, rise in Philadelphia Fed’s manufacturing index and an increase in Conference Board’s leading economic index overshadowed Wednesday’s negative sentiment arising from Federal Reserve’s indication of a possible hike in key lending rates sooner than expected.
Coming back to Friday, all the 10 sectors of the S&P 500 ended in the red. The Consumer Discretionary sector followed the Health Care sector. The Consumer Discret Select Sector SPDR (XLY) decreased 0.6%. Major stocks from the sector such as Comcast Corporation (NASDAQ:CMCSA), Amazon.com Inc. (NASDAQ:AMZN), The Walt Disney Company (NYSE:DIS), McDonald's Corp. (NYSE:MCD) and priceline.com Incorporated (NASDAQ:PCLN) slipped 1.2%, 2.3%, 0.6%, 1.2% and 1.8%, respectively.
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