Benchmarks closed in the red on Thursday following continuing worries over June rate hike. Minutes from Federal Open Market Committee’s (FOMC) April policy meeting that was released on Wednesday indicated a rate hike was likely in June. Meanwhile, comments made by some Fed officials further added to investor woes. The S&P 500 closed at its lowest level since March and turned negative for the year.
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The Dow Jones Industrial Average (DJI) decreased 0.5% to close at 17,435.40. The S&P 500 fell 0.4% to close at 2,040.04. The tech-laden Nasdaq Composite Index closed at 4,712.53, losing 0.6%. The fear-gauge CBOE Volatility Index (VIX) increased 2.4% to settle at 16.33. A total of around 7.2 billion shares were traded on Thursday, lower than the last 20-session average of 7.3 billion shares. Decliners outpaced advancing stocks on the NYSE. For 69% stocks that declined, 28% advanced.
Minutes of the FOMC’s April two-day policy meeting indicated that most Fed officials were optimistic about a rate hike in Fed’s June meeting. Moreover, New York Fed President William Dudley said he is "quite pleased" to see strong possibilities of a rate hike in June-July. Dudley also said the Fed is “on track to satisfy a lot of the conditions" for a rate rise. He added that if he sees that his own forecast “is sort of on track” then he thinks that “a tightening in the summer, the June-July time frame is a reasonable expectation."
Also, Richmond Fed President Jeffrey Lacker showed support for a June rate hike, after “risks from global and financial developments having virtually entirely dissipated.” Lacker previously wanted a rate hike in April, and now agreed that “the case would be very strong for raising rates in June.” Comments from Dudley and Lacker had a negative impact on key U.S. indexes.
Despite rising rate hike possibilities, the Financial Select Sector SPDR (XLF) declined 1%, emerging as the worst performer in the S&P 500 sectors. Top holdings from the sector such as Bank of America Corporation (BAC - Free Report) , Wells Fargo & Company (WFC - Free Report) , Citigroup Inc. (C - Free Report) and Berkshire Hathaway Inc. (BRK.B - Free Report) fell 1.1%, 0.6%, 18% and 0.5%, respectively. Dow components JPMorgan Chase & Co ( (JPM - Free Report) and Goldman Sachs Group, Inc. (GS - Free Report) decreased 1% and 3.3%, respectively.
Also, the Industrial Select Sector SPDR (XLI) fell 0.9% and was the second biggest loser among the S&P 500 sectors. Some of the key stocks from this sector including Raytheon Company , Lockheed Martin Corporation ( (LMT - Free Report) , Caterpillar Inc. (CAT) and Union Pacific Corporation (UNP) declined 1%, 1.1%, 1.6% and 1.3%, respectively. Dow components General Electric Company (GE - Free Report) , 3M Company (MMM - Free Report) , United Technologies Corporation and Boeing Company (BA - Free Report) decreased 0.8%, 1.1%, 0.8% and 2.2%, respectively.
In earnings news, Wal-Mart Stores Inc’s (WMT) shares jumped 9.6% after its fiscal first quarter 2017 earnings per share and total revenue of 98 cents and $115.9 billion beat the Zacks Consensus Estimates of 88 cents and $112.7 billion, respectively. Meanwhile, the company’s U.S. same-store sales (comps) for the 13-week period ending Apr 29 increased 1%, preceded by a 1.1% growth in comps in the prior-year quarter.
Gains in Wal-Mart helped the led the Consumer Staples Select Sector SPDR ETF (XLP) to increase 1%. Key consumer staples stocks including Procter & Gamble Company (PG), Costco Wholesale Corporation ( COST) and Kraft Heinz Company (KHC) rose 0.4%, 1% and 2.2%, respectively.
In economic news, the U.S Department of Labor reported that seasonally adjusted initial claims decreased 16,000 to 278,000 in the week ending May 14, falling for the first time in last four weeks. Initial claims remained below 300,000 for 63 consecutive weeks, its longest stretch since 1973. However, initial claims were more than the consensus estimate of 266,500. Also, the 4-week moving average came in at 275,750, compared to 268,250 reported last week.
Further, Leading Indicators Index advanced 0.6% in April, higher than consensus estimate of 0.4%. This reading follows an increase of 0.2% in March. However, the Philadelphia Fed’s business conditions index came in at -1.8 in May, compared to -1.6 in April.