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Stock Market News for May 06, 2016

Benchmarks closed mixed on Thursday as gains led by rally in oil prices was offset by discouraging economic data and lackluster earnings reports. Moreover, investors remained cautious ahead of today’s employment report. While the Dow managed to close in the green, both the S&P 500 and the Nasdaq closed in the red.

For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article

The Dow Jones Industrial Average (DJI) increased 9.45 points, to close at 17,660.71. However, the S&P 500 fell 0.49 points to close at 2,050.63. The tech-laden Nasdaq Composite Index closed at 4,717.09, losing 0.2%. The fear-gauge CBOE Volatility Index (VIX) decreased 0.9% to settle at 15.91. A total of around 7.3 billion shares were traded on Thursday, higher than the last 20-session average of 7.2 billion shares. Decliners outpaced advancing stocks on the NYSE. For 51% stocks that declined, 46% advanced.

Oil prices increased yesterday after a wildfire hit Fort McMurray, the oil city of Canada, which in turn affected crude production. Following this fire, Canada lost 690,000 barrels per day (bpd) of its total oil production of 2.2 million bpd. Moreover, International Energy Agency (IEA) reported that recent unrest in Libya has curbed the country’s oil production by 1 million bpd, higher than IEA’s previous forecast of 750,000 bpd.

Fall in crude output in Canada and Libya resulted in an oil prices rally. Both the WTI crude and Brent crude rose 1.2% and 0.9% to $44.32 per barrel and $45.01 a barrel, respectively.

However, oil prices curbed some of its gains after crude inventories in the delivery hub of Cushing, Oklahoma reportedly increased 1.35 million barrels for the week ending May 03. Also, U.S. Dollar Index (DXY) increased 0.6%, registering its third straight session rise, which adversely impacted oil prices movement.

Oil prices rally helped the Energy Select Sector SPDR (XLE) to increase 0.8% and was the biggest gainer among the major S&P 500 sectors. Key components including, Apache Corp. (APA), Spectra Energy Corp. (SE), EOG Resources (EOG), Pioneer Natural Resources Co. (PXD), Tesoro Corporation (TSO) and Occidental Petroleum Corporation (OXY) increased 8.1%, 3.6%, 2.4%, 2.8%, 1.4% and 3%, respectively. While, Dow components Exxon Mobil Corp (XOM) and Chevron Corp (CVX) advanced 0.1% and 0.8%, respectively.

Despite gains in energy sector, S&P 500 ended in the red with L Brands, Inc. (LB) being the biggest loser among the S&P 500 companies. Shares of L Brands slumped 12% after reporting fiscal first quarter revenues of $2.61 billion, missing the Zacks Consensus Estimate of $2.67 billion. Further last month, L Brands’ Victoria's Secret’s same store sales fell 1% after increasing 2% and 4% in March and February, respectively.

Following declines in L Brands, the Consumer Discretionary Select Sector SPDR (XLY) fell 0.6% and was the biggest loser among the S&P 500 sectors. Key components including TJX Companies, Inc. (TJX), Lowe's Companies, Inc. (LOW), Priceline Group Inc. (PCLN), NIKE, Inc. (NKE),, Inc. (AMZN) and Target Corp. (TGT) decreased 0.6%, 0.9%, 1%, 1.6%, 1.8% and 2%, respectively.

Shares of Merck & Co. Inc. (MRK) fell 1.3% after the company’s first quarter revenues came in at $9.3 billion, falling short of the Zacks Consensus Estimate of $9.5 billion. However, MRK’s first quarter earnings of 89 cents per share beat the Zacks Consensus Estimate of 85 cents.

Tesla Motors, Inc’s (TSLA) slumped 5% after the company posted first quarter adjusted loss of $1.24 per share, significantly wider than the Zacks Consensus Estimate of 78 cents loss. Further, adjusted revenues of $1.60 billion in the reported quarter, was in line with the Zacks Consensus Estimate.

In economic news, the U.S Department of Labor reported that seasonally adjusted initial claims increased 17,000 to 274,000 in the week ending April 30, reaching its highest level in last five weeks. Initial claims were more than the consensus estimate of 262,500. It was also the biggest increase in more than a year.

Separately, uncertainty regarding rate hike possibilities increased following Fed Presidents’ comments. San Francisco Fed President John Williams said: “Fed policymakers said two or three rate hikes this year. I think that's a reasonable view." But at the same time he emphasized that Fed will continue to observe economic data. Moreover, St. Louis Fed President James Bullard said weak economic growth had made him “dial back some of” his “projections about interest rate policy.” However, Atlanta Fed President Dennis Lockhart said that he is "on the fence" regarding rate hike in June.

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