The Dow and the S&P 500 posted steep declines on Wednesday after energy shares tanked following a decline in oil prices. This also marked the S&P 500 and Dow’s worst one-day drop since Sep 5. Additionally, worries centered on a possible delay in tax reforms also led the markets lower. Meanwhile, the Senate Finance Committee announced major amendments to its version of the tax bill. The proposal abolishes the individual mandate of Obamacare and increases the child tax credit.
The Dow Jones Industrial Average (DJIA) decreased 0.6%, to close at 23,217.28. The S&P 500 Index (INX) declined 0.6% to close at 2,564.62. The tech-laden Nasdaq Composite Index (IXIC) closed at 6,706.21, declining 0.5%. A total of 6.6 billion shares were traded on Wednesday, lower than the last 20-session average of 6.8 billion shares. Decliners outnumbered advancers on the NYSE by a 1.78-to-1 ratio. On Nasdaq, declining issues outnumbered the advancing ones by a 1.60-to-1 ratio. The CBOE VIX increased 13.3% to close at 13.13.
Oil Prices Decline, Weigh on the Broader Markets
Oil prices dipped further on Wednesday to close at a record low. This comes just two weeks after U.S. Energy Information Administration (EIA) issued a statement that crude inventories in the United States had surged for two straight weeks. Such an event led to a decreased appetite for risk among risk-averse investors.
Further, the EIA announced on Wednesday that domestic crude supply had surged by 1.9 million barrels for the last week. Moreover, West Texas Intermediate crude dipped $0.37 to $55.33 per barrel in December. Energy shares were also weighed down by the release of a report by International Energy Agency in which the global body slashed global crude-demand forecasts and stated that U.S. shale-oil production will witness a boom in the near future. This led to crude prices plummeting to their lowest levels since Nov. 3.
Senate Presents Major Changes to its Tax Bill
Late Tuesday, the Senate Finance Committee announced significant changes to the tax bill. The new amendment which was proposed completely repeals the individual mandate in Obamacare. Moreover, it also reinforced child tax credit. Repealing the individual mandate would help the administration save around $300 billion over the next ten years. However, Republican Senator Ron Johnson commented that he wouldn’t vote for the Bill.
The latest draft also seeks to increase the child tax credit to $2,000 from $1,000 currently. In an earlier version, the tax credit was proposed to be increased to $1,650. Moreover, the new draft also lowered the individual tax rates in three brackets to 22%, 24% and 32%, respectively from 22.5%, 25% and 32.5%, earlier. Finally, the corporate tax rate remains fixed at 20%, like in the earlier version.
How Did Benchmarks Perform?
The Dow nosedived 138.19 points to post its worst daily drop since Sep 5. Shares of Caterpillar Inc. (CAT - Free Report) tanked 2.5% and was the biggest drag on the Dow. However, shares of General Electric (GE - Free Report) gained 2% and help the blue-chip index cap some of the losses.
The S&P 500 declined 14.25 points to close in the red. Of the 11 major sectors of the benchmark, 10 ended in the negative territory. Such losses were led by energy shares which weighed heavily on the index after the oil prices declined sharply. The Energy Select Sector SPDR ETF (XLE) declined 1.2%.
This dismal run by the S&P 500 also marked the first time in last 50 sessions that the benchmark has slipped more than 0.5%. This also ended the S&P 500’s longest streak of runs since 1968 in which the benchmark did not decline more than 0.5%. Also weighing on the S&P 500 were tax woes.
Core CPI for October came in at 0.2%, up from 0.1% in September. The consensus estimate for the period was 0.2%. Moreover, CPI for October increased 0.1%, down from 0.5% in September. This was in line with the consensus estimate for the period. This decreased the yearly rate of inflation to 2% from 2.2% in September.
Retail sales for October increased a meager 0.2%, down from 1.9% in September. This also beat the consensus estimate of an increase of 0%. Sales of building materials, gasoline stations and non-store retailers remained weak in October. Meanwhile, auto sales increased 0.7% in October.
Stocks That Made Headlines
Walmart Stock Gains on Solid Q3 Earnings & Raised View
Supermarket giant, Wal-Mart Stores, Inc. (WMT - Free Report) posted third-quarter fiscal 2018 results, wherein both earnings and revenues improved year over year and exceeded the Zacks Consensus Estimate. (Read More)
SandRidge (SD - Free Report) Announces Bonanza Creek Buyout Worth $746M
Oil and natural gas company, SandRidge Energy, Inc. (SD - Free Report) recently agreed to acquire its rival Bonanza Creek Energy Inc. (BCEI). (Read More)
BP to Recommence Share Repurchase as Crude Bounces Back
BP Plc (BP - Free Report) recently commenced a share buyback program, keeping with the plans announced along with the third-quarter 2017 earnings report. (Read More)
Petrobras Misses on Q3 Earnings, Manages to Cut Debt
Brazil's state-run energy giant Petroleo Brasileiro S.A., or Petrobras (PBR - Free Report) saw its shares crash more than 7% after it announced third-quarter earnings per ADR, way short of the Zacks Consensus Estimate. (Read More)
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