Benchmarks closed in negative territory on Thursday following concerns over a likelihood of a government shutdown. Sectors like real estate and utilities, which are considered as alternatives to bonds, declined after yield on 10-year Treasury notes reached its highest level since 2014. Additionally, increase in U.S. gasoline inventories and sharp rise in domestic crude production weighed on oil prices, which in turn led the energy sector downward.
How the Benchmarks Fared?
The Dow Jones Industrial Average (DJI) decreased 0.4%, or 96.32 points to close at 26,115.65. The S&P 500 fell 0.2% to close at 2,798.03. The tech-laden Nasdaq Composite Index closed at 7,296.05, losing 2.23 points. The fear-gauge CBOE Volatility Index (VIX) increased 2.6% to close at 12.22. A total of around 6.93 billion shares were traded on Thursday, higher than the last 20-session average of 6.3 billion shares. Decliners outnumbered advancers on the NYSE by a 2.64-to-1 ratio. On Nasdaq, a 1.74-to-1 ratio favored declining issues.
Shutdown Specter Weighs on Benchmarks
After closing at new all-time highs on Wednesday all the three key U.S. indexes fell on Thursday following concerns of partial government shutdown. On Thursday, the House voted 230 to 197 in favor of passing a short-term spending bill, in order to avoid government shutdown. However, the bill is expected to face a setback in the Senate, which in turn raised concerns of a possible government shutdown. Following this development, nine of the 11 key S&P 500 sectors fell during the day.
Higher rate environment and optimism of a steady economic growth weighed on bond prices. Lower bond prices supported the 10-year U.S. Treasury yield, which increased from 2.579% to 2.611% on Thursday, reaching its best level since September 2014. Higher treasury yields weighed on steady dividend paying sectors like real estate and utilities.
The Real Estate Select Sector SPDR (XLRE) declined 1%, becoming the worst performing sector of the S&P 500. Some of its key holdings, including Simon Property Group, Inc. (SPG - Free Report) and American Tower Corporation (AMT - Free Report) fell 1.9% and 1.1%, respectively. Additionally, the Utilities Select Sector SPDR (XLU) decreased 0.6%, with its two major components Duke Energy Corporation (DUK - Free Report) and NextEra Energy, Inc. (NEE - Free Report) falling 1.4% and 0.7%, respectively.
Oil Slump Weighs on Energy, MS Earnings Comfort
Moreover, for the week ended Jan 12 total motor gasoline inventories climbed 3.62 million barrels, per the Energy Information Agency’s (EIA) weekly petroleum data. Also, U.S. crude production increased 258,000 barrels per day to 9.75 million barrels, after falling in the preceding week. Increase in gasoline inventories and stronger domestic crude production led both WTI and Brent crude to decrease 0.03% and 0.1% to $63.95 per barrel and $69.31 a barrel, respectively.
Fall in oil prices led the Energy Select Sector SPDR (XLE) to decline 0.8%, which was second biggest loser among the S&P 500 sectors. Some of its key components, including Chevron Corporation (CVX - Free Report) and Exxon Mobil Corporation (XOM - Free Report) fell 0.6% and 0.7%, respectively. Both the oil giants hold a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, on the earnings front, shares of Morgan Stanley (MS) increased 0.9% after the investment bank reported fourth-quarter earnings and revenues, which beat the respective Zacks Consensus Estimate. Both the top and bottom line for Morgan Stanley increased year-over-year. (Read More: Morgan Stanley Beats Q4 Earnings Amid Trading Weakness)
Stocks That Made Headlines
GATX Corp Q4 Earnings Disappoint, Revenues Top Estimates
GATX Corporation (GATX - Free Report) delivered mixed results in the fourth quarter. The company reported lower-than-expected earnings per share but better-than-expected revenues. (Read More)
C.H. Robinson Q3 Earnings & Revenues Beat Estimates
C.H. Robinson Worldwide Inc.’s (CHRW - Free Report) fiscal third-quarter earnings per share and revenues beat the respective Zacks Consensus Estimate. (Read More)
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