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Stock Market News for May 16, 2014

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Benchmarks suffered their worst losses in five weeks on Thursday, dragged down by declines in small-cap stocks and Wal-Mart’s disappointing numbers. The S&P 500 slumped the most in a month and the Dow registered its biggest drop since April 10. Investors were also concerned about Euro zone’s less-than-expected first quarter GDP growth.

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 1.0% to close Thursday’s trading session at 16,446.81. The Standard & Poor 500 (S&P 500) declined 0.9% to finish at 1,870.85. The tech-laden Nasdaq Composite Index dropped 0.8% to 4,069.29. The fear-gauge CBOE Volatility Index (VIX) surged 8.2% to settle at 13.17. Total volume for the day was roughly 6.8 billion shares, higher than this month’s average of 6.0 billion. Decliners outpaced advancing stocks on the NYSE.  For 68% stocks that declined, 29% advanced.

Benchmarks ended in the red for the second consecutive day primarily due to declines in small-cap stocks. The Russell 2000 Index of small-caps registered its third successive decline after the index slipped 0.7% yesterday. On Wednesday the small-cap index had declined 1.6% followed by a drop of 1.1% on Tuesday. The Russell 2000 remained below its 200-day moving average and is down 10% from its record high of 1,208.65 achieved on March 4.
Wal-Mart Stores Inc.’s (NYSE:WMT) dismal quarterly results was also a big drag on the Dow and the S&P 500. The world’s largest retailer posted fiscal first quarter 2015 adjusted earnings of $1.10 per share that lagged the Zacks Consensus Estimate of $1.15 by 4.3% and declined 3.5% from the year-ago earnings of $1.14 per share. Also, the company projected fiscal second quarter 2015 adjusted earnings to range between $1.15 and $1.25 per share, lower than last year’s earnings of $1.24 per share. Shares of the retailer dropped 2.4%.
Investors were also anxious about Euro-zone’s economic growth. The economy during the first quarter expanded at a slower pace than expected. The gross domestic product grew at 0.2%, falling short of analysts’ expectation of an increase by 0.4%. Inflation rate also remained in the ‘danger zone’, below 1% in April.
Coming to economic data, the US Bureau of Labor Statistics came out with consumer price data; wherein it reported Consumer Price Index for All Urban Consumers (CPI-U) had improved just 0.3% in April. The increase was in line with the consensus estimate. Rise in energy prices, food prices, housing costs, medical care, airline tickets and new cars were cited to be the reasons behind the rise in consumer prices.
The April 2014 Empire State Manufacturing Survey released by the Federal Reserve Bank of New York indicated that manufacturing conditions improved significantly for New York manufacturers. The Empire State Index surged to 19.01 in May from 1.29 in April. The general business conditions index reached its highest level since mid-2010. This rise was also way ahead of the consensus estimate of a rise to 4.50. The new orders index and the shipments index too rose to 10.4 and 17.4, respectively.
However, the Philadelphia Federal Reserve’s manufacturing index declined to 15.4 in May from 16.6 in April. It also stated that demand for manufactured goods as measured by current new orders is down to 10.5 in May from 14.8 in April. Current shipments also decreased. Additionally, inventories remained in the negative territory and employment indexes hardly changed.
Also, The Board of Governors of the Federal Reserve System reported a decrease in industrial production. The report stated industrial production declined 0.6% in April after it increased 0.9% in March. This decline in industrial production in April was in contrast to the consensus expectation of industrial production remaining flat. Decline in output of utilities by 5.3% was cited to be the reason behind the decrease in factory production for the month of April. Separately, capacity utilization decreased to 78.6%, more than the consensus expectation of a decrease to 79.1%.
Separately, the U.S Department of Labor reported that seasonally adjusted initial claims decreased 24,000 to 297,000 in the week ending May 10. The decline in weekly applications for unemployment benefits was also more than the consensus expectation of initial claims decreasing to 320,000.
All the 10 sectors of the S&P 500 ended in the red. The Materials Select Sector SPDR (XLB) led the decline among the S&P 500 sectors. The sector decreased 1.4%. Top holdings from the Materials sector such as E. I. du Pont de Nemours and Company (NYSE:DD), The Dow Chemical Company (NYSE:DOW), Monsanto Company (NYSE:MON), LyondellBasell Industries NV (NYSE:LYB) and Praxair Inc. (NYSE:PX) dropped 1.3%, 3.2%, 1.4%, 1.4% and 0.8%, respectively.
The Energy Select Sector SPDR (XLE) and the Financial Select Sector SPDR (XLF) followed the Materials sector as both the sectors decreased 1.1%. Key stocks from the Energy sector such as Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), Schlumberger Limited (NYSE:SLB) and ConocoPhillips (NYSE:COP) dropped 1.5%, 1.2%, 1.2% and 0.5%, respectively.
Major holdings from the Financials sector such as such as Wells Fargo & Company (NYSE:WFC), JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC) and Citigroup Inc. (NYSE:C) decreased 0.5%, 1.6%, 1.9% and 1.3%, respectively.

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