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Stock Market News for May 16, 2016

Despite encouraging retail sales data, benchmarks ended in the red on Friday following decline in oil prices and weak quarterly earnings results. Both the Dow and S&P 500 closed at their lowest level since Apr 11 and Mar 28, respectively. The blue chip index and S&P 500 registered their third straight weekly declines for the first time since the week ended Jan 15. Also, the Nasdaq posted its fourth consecutive weekly loss for the first time since Oct 2014.

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) decreased 1.1%, or 185.18 points to close at 17,535.32. The S&P 500 fell 0.9% to close at 2,046.61. The tech-laden Nasdaq Composite Index closed at 4,717.68, losing 0.4%. The fear-gauge CBOE Volatility Index (VIX) increased 4.4% to settle at 15.04. A total of around 6.6 billion shares were traded on Friday, lower than the last 20-session average of 7.2 billion shares. Decliners slightly outpaced advancing stocks on the NYSE. For 65% stocks that declined, 32% advanced.

Oil prices dropped on Friday following strengthening of the dollar. The U.S. Dollar Index (DXY) increased 0.1% to 94.307, reaching its highest level since Apr 28. While the euro decreased to about $1.13 against the greenback, the dollar increased to around 108.7 yen.

Also, Russia’s Energy Minister Alexander Novak’s discouraging comments weighed on oil prices. Reportedly, Novak said that as the global crude surplus remained at 1.5 million barrels per day (bpd), "(the outlook that the market won't balance until the first half of 2017) is an optimistic forecast as oversupply persists.” Both the WTI crude and Brent crude fell 1.1% and 0.5% to $46.21 per barrel and $47.83 a barrel, respectively.

However, losses in oil prices were curbed to some extent after Baker Hughes (BHI) reported that U.S. oil rig count fell from 320 to 310, declining for the eighth straight week. Moreover, disruptions in Nigeria led the country to reduce crude output to its lowest level in more than 20 years. Nigeria’s Finance Minister Kemi Adeosun said that crude production has fallen from 2.2 million bpd to 1.65 million bpd following recent militant attacks.

Decline in oil prices led the Energy Select Sector SPDR (XLE) to decrease 1.3% and to become the second biggest loser among the S&P 500 sectors. Dow components Chevron Corp (CVX) and Exxon Mobil Corp (XOM) fell 1.4% and 1.1%, respectively. Other key energy stocks including, Schlumberger Limited ( SLB), Pioneer Natural Resources Co. (PXD), Southwestern Energy Company (SWN), Halliburton Company (HAL), EOG Resources, Inc. (EOG) and Transocean Ltd. ( RIG) decreased 2.2%, 2.1%, 5.1%, 2.5%, 2.3% and 4.4%, respectively.

Additionally, the Financial Services Select Sector SPDR (XLFS) fell 1.5%, emerging as the biggest decliner in the S&P 500 sectors. Top holdings from the sector such as Bank of America Corporation (BAC), Wells Fargo & Company (WFC), Citigroup Inc. (C) and Berkshire Hathaway Inc. (BRK.B) slumped 1.8%, 2%, 2% and 1.3%, respectively. Dow components JPMorgan Chase & Co ( JPM) and The Goldman Sachs Group, Inc. (GS) decreased 0.9% and 1.7%, respectively. All the 12 S&P 500 sectors ended in the red.

In earnings news, Nordstrom Inc’s shares (JWN) slumped 13.4%, becoming the biggest loser among the S&P 500 companies. Nordstrom’s fiscal first quarter earnings per share and revenues of 26 cents and $3,249 million fell short of the Zacks Consensus Estimates of 45 cents and $3,293 million, respectively. Earnings fell 60.6% year-over-year, but revenues rose 2.5% during the same time frame.

Shares of J. C. Penney Company, Inc. (JCP) fell 2.8% after reporting fiscal first quarter net sales of $2,811 million, lower than the Zacks Consensus Estimate of $2,922 million and down 1.6% year on year. However, its adjusted loss of 32 cents a share was narrower than the Zacks Consensus Estimate of a loss of 40 cents and the prior-year quarter loss of 57 cents.

In economic news, the Commerce Department reported that the U.S. retail sales rose 1.3% last month, higher than the consensus estimate of 0.8% rise, reaching its highest level since March 2015. The reading was also favorable compared to March’s fall of 0.3%.

The U.S. Bureau of Labor Statistics reported that the U.S. Producer Price Index (PPI) for finished goods increased 0.2% in April. Last month’s increase was wider than the consensus estimate of 0.3% rise and was preceded by 0.1% drop in March. Core PPI increased 0.1% April, remaining in line with consensus estimate and was in contrast to March’s reading of 0.1% fall.

The preliminary reading of consumer sentiment index released by University of Michigan came in at 95 in May, higher than the consensus estimate of 89.4. It was also higher than the April’s reading of 89.

For the week, the Dow, S&P 500 and Nasdaq declined 1.2%, 0.5% and 0.4%, respectively, following losses in consumer discretionary and financial services stocks. Discouraging earnings reports and weak global economic data had a negative impact on key U.S. indexes.

In company news, Staples, Inc (SPLS) shares fell after the planned merger between the company and Office Depot, Inc. (ODP) was cancelled. Walt Disney Company (DIS), Macy's, Inc. (M), Kohl’s Corporation ( KSS) and Michael Kors Holdings Limited (KORS) posted weaker than expected earnings results which along with decline in Staples, weighed down on consumer discretionary sector.

SolarCity Corporation (SCTY) also posted disappointing earnings results, but Electronic Arts Inc ( EA) and Teva Pharmaceutical Industries Limited (TEVA) reported better than expected earnings results.

Additionally, during the week Apple Inc (AAPL) hit its worst closing level since June 2014, following concerns over a slump in iPhone sales. Total market cap of Apple yesterday was $494.7 billion, lower than Alphabet Inc’s (GOOGL) market cap of $494.9 billion, making Google the world’s biggest company. However, Allergan plc (AGN) gained after the company gave approval to a new share repurchase program of $10 billion and the company posted better than expected quarterly reports.

In economic news, rise in initial claims negatively impacted the market, but decline in crude inventories boosted oil prices. Further, disruptions in Nigeria and Canada reduced crude oversupply worries by a significant extent, which also pushed oil prices upward. Both the WTI crude and Brent crude rose 3.5% and 5.3%, respectively for the week.

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