S&P 500 Extends Losing Streak to 5 Days
By Anora Mahmudova and Carla Mozee
Published: Jan 6, 2015 5:07 p.m. ET
NEW YORK (MarketWatch) — The U.S. stock market endured another day of selling due to slumping oil prices on Tuesday, with the Dow industrials recording its worst start to a new year the 2008 financial crisis.
Indexes bounced off session lows in the late-afternoon trade, which some analysts attributed to short-covering, however, a meager rally late in the day quickly dissipated.
The benchmark S&P 500 index fell for the fifth-straight session and is off more than 4% from its peak reached on Dec 29, 2014. Slumping oil prices and flight to havens such as Treasurys led to a bout of selling for the second consecutive day.
Investors were scouring for safe industries such as utilities as well as U.S. Treasurys, pushing yields to the lowest levels since the Oct.15 mini-flash crash.
The S&P 500 SPX, -0.89% closed 17.97 points, or 0.9%, lower at 2,002.61, with only two sectors remaining in the green — utilities and telecoms. Large-cap energy sector stocks, which fell 4% on Monday, slumped 1.5% again on Tuesday.
The energy sector is down 22% since the June 30, 2014 close, while the S&P Small Cap 600 energy sector has lost nearly half of its value in that time, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
The Dow Jones Industrial Average DJIA, -0.74% dropped 130 points, or 0.7%, to 17,371.64, a day after a 331-point drop on Monday. The Nasdaq Composite COMP, -1.29% fared the worst, dropping 59.84 points, or 1.3%, to 4,592.74, ringing up a fifth-straight day of losses.
JJ Kinahan, chief strategist at TD Ameritrade, noted that it would be difficult for stocks to rise in the face of growing demand for bonds.
“There is a tremendous appetite for fixed income - mainly because of nervousness about commodity markets. When stock investors focus on oil prices, their first reaction is selling and unwinding of long positions,” Kinahan said.
Investors appear to discount positive effect of lower oil prices on broader economy and continue to view the slide in crude as a symptom of slower global growth, which will threaten improving U.S. economy.
Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research, noted that big down moves in oil continued to spook investors despite the longer-term benefits of lower energy prices.
“Markets are overdue for a correction, but so far selling has been measured and not at panic levels. At the moment there are many factors that are weighing on markets, from Greece’s potential exit from euro to possible actions by the Fed, which will struggle to raise rates in current environment of falling inflation,” Frederick said.
Frederick added that the Vix index must hit 30 before the market reaches panic levels. The Vix, known as Wall Street’s fear gauge, closed up 6% at 21.12.
Kate Warne, investment strategist at Edward Jones, said that Monday’s selloff was an overreaction to uncertainty surrounding the eurozone economy as Greece looks likely to exit the union, while a slide in oil prices stoked further worries about stagnating global economic growth outside of the U.S.
“In the long-term, lower oil prices are a positive to major economies, but until oil finds a bottom, there will be short-term fear over global growth,” Warne said.
Lackluster economic reports did little to help spread optimism. Companies in the U.S. service sector such as retail and real estate grew at a slower but still-healthy pace in December, according to a survey of senior executives released Tuesday. Orders for goods produced in U.S. factories fell 0.7% in November, hit by transportation equipment, matching the forecast from MarketWatch-polled economists, according to government data released Tuesday.
Analysts said that investors are wary of making big bets ahead of the important jobs report on Friday, which will shed light on how well the U.S. economy is performing amid global weakness.
Crude-oil prices extended losses on Tuesday, with U.S. oil futures CLG5, +0.08% closed down 4.2% below $48 a barrel for the first time since April 2009. Brent futures LCOG5, -0.20% fell 3.8% to $51.10 a barrel.
“The economic conditions that oil faces continue to be aggressively against the commodity, making buyers extremely hesitant to even consider entering long positions,” said Jameel Ahmad, chief market analyst at FXTM, in a Tuesday note. “There are also suspicions that as oil companies struggle to adapt to lower profits, there could be mergers and acquisitions taking place in the future, and this will weigh on investor sentiment. What’s the answer to this equation? Bearish moves for oil.”
Stocks to Watch: Verizon Communications Inc. VZ, +1.01% has approached AOL Inc. AOL, +3.38% about a possible acquisition or joint venture, Bloomberg reported Monday, citing people with knowledge of the matter. Shares in AOL jumped 3.4% Verizon’s CEO Loweell McAdam played down reports of the company merging with AOL, and instead pointed to the possibility of a partnership with one or more media companies.
Cyberonics Inc. CYBX, -5.94% shares fell 5.9% after the medical-device maker said an appeals board supported a 2007 decision by the Centers for Medicare and Medicaid that denied coverage of the company’s pacemaker-like device for treating depression.
Coach Inc. COH, -1.17% shares were fell 1.2% after the company said it’s buying luxury footwear brand Stuart Weitzman from private equity firm Sycamore Partners, in a deal valued at up to $574 million.
Nielsen N.V. NLSN, -2.16% shares fell 2.2% after financial-news network CNBC said it will no longer rely on the TV-ratings specialist to measure its daytime audience, beginning later this year.
Read more: Movers & Shakers column.
Other markets: Meanwhile, the yield on the 10-year Treasury TMUBMUSD10Y, +0.35% fell 13 basis points to 1.9%, according to Tradeweb.
In Asia, the Nikkei NIK, +0.54% fell 3% to post its biggest one-day loss in nearly 10 months, and Indian shares plummeted 3.1%, their steepest loss since September 2013. European stocks SXXP, -0.71% closed lower.
Published: Jan 6, 2015 5:07 p.m. ET
NEW YORK (MarketWatch) — The U.S. stock market endured another day of selling due to slumping oil prices on Tuesday, with the Dow industrials recording its worst start to a new year the 2008 financial crisis.
Indexes bounced off session lows in the late-afternoon trade, which some analysts attributed to short-covering, however, a meager rally late in the day quickly dissipated.
The benchmark S&P 500 index fell for the fifth-straight session and is off more than 4% from its peak reached on Dec 29, 2014. Slumping oil prices and flight to havens such as Treasurys led to a bout of selling for the second consecutive day.
Investors were scouring for safe industries such as utilities as well as U.S. Treasurys, pushing yields to the lowest levels since the Oct.15 mini-flash crash.
The S&P 500 SPX, -0.89% closed 17.97 points, or 0.9%, lower at 2,002.61, with only two sectors remaining in the green — utilities and telecoms. Large-cap energy sector stocks, which fell 4% on Monday, slumped 1.5% again on Tuesday.
The energy sector is down 22% since the June 30, 2014 close, while the S&P Small Cap 600 energy sector has lost nearly half of its value in that time, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
The Dow Jones Industrial Average DJIA, -0.74% dropped 130 points, or 0.7%, to 17,371.64, a day after a 331-point drop on Monday. The Nasdaq Composite COMP, -1.29% fared the worst, dropping 59.84 points, or 1.3%, to 4,592.74, ringing up a fifth-straight day of losses.
JJ Kinahan, chief strategist at TD Ameritrade, noted that it would be difficult for stocks to rise in the face of growing demand for bonds.
“There is a tremendous appetite for fixed income - mainly because of nervousness about commodity markets. When stock investors focus on oil prices, their first reaction is selling and unwinding of long positions,” Kinahan said.
Investors appear to discount positive effect of lower oil prices on broader economy and continue to view the slide in crude as a symptom of slower global growth, which will threaten improving U.S. economy.
Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research, noted that big down moves in oil continued to spook investors despite the longer-term benefits of lower energy prices.
“Markets are overdue for a correction, but so far selling has been measured and not at panic levels. At the moment there are many factors that are weighing on markets, from Greece’s potential exit from euro to possible actions by the Fed, which will struggle to raise rates in current environment of falling inflation,” Frederick said.
Frederick added that the Vix index must hit 30 before the market reaches panic levels. The Vix, known as Wall Street’s fear gauge, closed up 6% at 21.12.
Kate Warne, investment strategist at Edward Jones, said that Monday’s selloff was an overreaction to uncertainty surrounding the eurozone economy as Greece looks likely to exit the union, while a slide in oil prices stoked further worries about stagnating global economic growth outside of the U.S.
“In the long-term, lower oil prices are a positive to major economies, but until oil finds a bottom, there will be short-term fear over global growth,” Warne said.
Lackluster economic reports did little to help spread optimism. Companies in the U.S. service sector such as retail and real estate grew at a slower but still-healthy pace in December, according to a survey of senior executives released Tuesday. Orders for goods produced in U.S. factories fell 0.7% in November, hit by transportation equipment, matching the forecast from MarketWatch-polled economists, according to government data released Tuesday.
Analysts said that investors are wary of making big bets ahead of the important jobs report on Friday, which will shed light on how well the U.S. economy is performing amid global weakness.
Crude-oil prices extended losses on Tuesday, with U.S. oil futures CLG5, +0.08% closed down 4.2% below $48 a barrel for the first time since April 2009. Brent futures LCOG5, -0.20% fell 3.8% to $51.10 a barrel.
“The economic conditions that oil faces continue to be aggressively against the commodity, making buyers extremely hesitant to even consider entering long positions,” said Jameel Ahmad, chief market analyst at FXTM, in a Tuesday note. “There are also suspicions that as oil companies struggle to adapt to lower profits, there could be mergers and acquisitions taking place in the future, and this will weigh on investor sentiment. What’s the answer to this equation? Bearish moves for oil.”
Stocks to Watch: Verizon Communications Inc. VZ, +1.01% has approached AOL Inc. AOL, +3.38% about a possible acquisition or joint venture, Bloomberg reported Monday, citing people with knowledge of the matter. Shares in AOL jumped 3.4% Verizon’s CEO Loweell McAdam played down reports of the company merging with AOL, and instead pointed to the possibility of a partnership with one or more media companies.
Cyberonics Inc. CYBX, -5.94% shares fell 5.9% after the medical-device maker said an appeals board supported a 2007 decision by the Centers for Medicare and Medicaid that denied coverage of the company’s pacemaker-like device for treating depression.
Coach Inc. COH, -1.17% shares were fell 1.2% after the company said it’s buying luxury footwear brand Stuart Weitzman from private equity firm Sycamore Partners, in a deal valued at up to $574 million.
Nielsen N.V. NLSN, -2.16% shares fell 2.2% after financial-news network CNBC said it will no longer rely on the TV-ratings specialist to measure its daytime audience, beginning later this year.
Read more: Movers & Shakers column.
Other markets: Meanwhile, the yield on the 10-year Treasury TMUBMUSD10Y, +0.35% fell 13 basis points to 1.9%, according to Tradeweb.
In Asia, the Nikkei NIK, +0.54% fell 3% to post its biggest one-day loss in nearly 10 months, and Indian shares plummeted 3.1%, their steepest loss since September 2013. European stocks SXXP, -0.71% closed lower.
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