U.S. stock markets witnessed mixed trends on Friday. The Dow 30 and S&P 500 reversed their losing streak primarily attributed to an energy sector rally following the meeting between OPEC and Russia led consortium that took place in Vienna on Jun 22. However, the Nasdaq Composite ended in negative territory due to losses in the technology sector. Moreover, investors are yet to recover from trade related tensions.
The Dow Jones Industrial Average (DJI) closed at 24,580.89, up 0.5% or 119.19 points. The S&P 500 Index (INX) also increased 0.2% to close at 2,754.88. However, the Nasdaq Composite Index (IXIC) closed at 7,692.82, losing 0.3%. A total of 9.7 billion shares were traded on Friday, higher than the last 20-session average of 7.17 billion shares. Advancers outnumbered decliners on the NYSE by 2.05-to-1 ratio. On the Nasdaq, advancers had an edge over decliners by 1.16- to-1 ratio. The CBOE VIX decreased 5.9% to close at 13.77.
How Did the Benchmarks Perform?
The Dow gained 0.5% reversing eight-session long losing streak. This was the blue-chip index’s longest stretch of losses since March 2017 and was just one day short of its all-time longest losing streak since 1978. Notably, 24 of the 30-stocks index closed in the green while 6 traded in the red.
The S&P 500 rose 0.2% led by 2% gain of the Energy Select Sector SPDR (XLE) and 1.4% increase of Materials Select Sector SPDR (XLB). Notably, eight out of 11 sectors of the benchmark index ended in positive territory.
The tech-laden Nasdaq Composite decreased 0.3% reflecting the index’s second straight losing session. The index ended in the red mainly due lower-than-expected earnings results of some leading tech companies.
OPEC Meeting Leads Energy Sector Rally
On Jun 22, a congregation of OPEC (Oil and Petroleum Exporting Countries) countries and non-OPEC allies led by Russia assembled in Vienna to take a decision regarding an 18-month old agreement to curb output in order to meet strong global demand for crude oil. The production barrier was imposed to support global oil prices.
Saudi Arabia and Russia were in favor of elimination of output restrictions even if that means lower oil prices. These two countries want to increase oil supply by 1.5 million-barrels-a-day. However, Iran, Iraq, Venezuela, Libya and some other OPEC members were in favor of maintaining status quo. Finally, OPEC decided to raise production quota by 624,000 barrels a day, much lower than 1.5 million barrels a day demanded by Saudi Arabia and Russia.
Higher oil prices will be major boon for the U.S. oil exploration industry. The U.S. shale production of crude oil is currently going on in full swing. After the OPEC decision, U.S. crude prices surged 4.6% at $68.58 a barrel and Brent crude price soared 3.4% at $75.55.
Higher oil price and higher volume sales will significantly increase revenues of U.S. oil majors. Consequently, stock prices of both Exxon Mobil Corp. (XOM - Free Report) and Chevron Corp. (CVX - Free Report) increased around 2.1%. While Exxon carries a Zacks Rank #3 (Hold), Chevron sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Trade War Fears Remain
The ongoing trade conflict between the United States and China took a worse turn as President Trump requested the United States Trade Representative identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10%. This was in addition of 20% tariffs imposed on $50 worth of Chinese goods earlier. Further, Trump threatened China that another phase of tariff on additional $200 billion of Chinese goods will be imposed if China retaliates on U.S. tariffs.
Moreover, President Trump indicated that United States may impose 20% tariffs on auto imports from the European Union (EU). Notably, since Jun 1, the United States has imposed 20% tariffs on steel and 10% tariffs on aluminum imported from the EU. Most of the EU members are closed allies of the United States. The EU has retaliated with tariffs on $3.2 billion U.S. imports.
Last week was a disappointing one for Wall Street. All three major indexes posted weekly losses. The Dow, S&P 500 and Nasdaq Composite shed 2%, 0.9% and 0.7%, respectively. The Dow 30 witnessed its largest weekly decline since Mar 23 as well as its second straight weekly fall. However, Nasdaq posted its first weekly loss ending its winning streak of four straight weeks. Notably, on Jun 20, the Nasdaq Composite hits a new all-time high.
The Dow and the S&P 500 declined modestly while Nasdaq Composite gained modestly on Monday, as trade war fears once again escalated making investors jittery. However, markets ended sharply lower on Tuesday, as trade war fears escalated once again after President Donald Trump threatened to impose additional tariffs on another $200 billion of Chinese goods, and China said that it would retaliate.
On Wednesday, The Nasdaq closed at a record high, led by a rally in large-cap tech stocks. The tech rally was formed due to announcement of several merger and acquisition deals. However, growing fears of a U.S.-China trade war continued to take its toll on the Dow and S&P 500.
Markets closed sharply lower on Thursday, as trade war fears between the United States and China once again dented investors’ sentiments. Markets were further rattled after a Supreme Court ruling on sales tax saw shares of online retailers tumbling. Consequently, all three major indexes ended in the red.
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