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Stock Market News for July 06, 2017

The Nasdaq and the S&P 500 finished in the green on Wednesday as technology shares ended its three day losing streak. The technology sector staged a recovery boosted by gain in shares of tech stalwarts such as Apple, Facebook and Amazon. Energy shares declined as oil prices dropped following the release of reports showing increase in monthly exports from OPEC. News that Russia opposed any attempts to deepen production cuts also dragged down oil prices.

Meanwhile, minutes of June 13-14 Federal Open Market Committee meeting showed that several Fed officials were in favor of unwinding its massive $4.5 trillion balance sheet within a “couple of months”. Investors remained concerned on such tightening measures without a considerable pickup in economic growth. Separately, investors remained focused on the news of North Korea’s launch of an intercontinental ballistic missile.

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) declined 1.10 points to close at 21,478.17. The S&P 500 rose 0.2% to finish at 2,432.54. The tech-heavy Nasdaq Composite Index advanced 0.7% to close at 6,150.86. A total of around 6.52 billion shares were traded on Wednesday, lower than the last 20-session average of 7.19 billion shares. Decliners outnumbered advancing stocks on the NYSE by a 1.60 to 1 ratio.

Technology Shares Bounce Back

Technology shares bounced back on Wednesday, lifting the Nasdaq and the S&P 500 higher.  Investors appeared to have recovered their faith in tech shares after the tech sector suffered a drop of 0.7% in the previous session. Earlier tech shares had suffered several setbacks in the backdrop of concerns about valuations of technology companies.

Shares of tech stalwarts including Facebook FB, Apple AAPL and Amazon AMZN recorded gain of 1.3%, 0.4% and 1.9% respectively. The broader Technology Select Sector SPDR (XLK) advanced 1%, emerging as the best performing sector of the S&P 500.

Energy Shares Drop

Oil prices posted its biggest drop in a month on Wednesday, ending its longest stretch of gains since 2010. Prices were down for the first time in nine sessions following reports of increase in OPEC’s monthly exports. Prices were also adversely affected following news that Russia opposed any attempts to deepen production cuts.  

As per a report released by Reuters on Wednesday, OPEC’s oil exports increased by 450,000 barrels per day (bpd) to 25.92 million bpd in June, compared to the previous month. In May, OPEC and non-OPEC members including Russia had extended a deal to curtail oil production by 1.8 million barrels per day into the first quarter of the next year. However, Russia ruled out of any possibility of deepening such production cuts. Four Russian government officials, speaking to Bloomberg commented that Russia would stick to the present deal and would not support any proposals for further production cuts.

The rise in exports from OPEC and news about Russia’s opposition to deepen production cuts had a negative impact on oil prices. WTI crude prices declined by $1.94, or 4.3%, to $45.13 a barrel. The broader Energy Select Sector SPDR (XLE) fell 2%, emerging as the worst performing sector of the S&P 500. Some of its key holdings, including Exxon Mobil Corp XOM and Chevron Corp CVX declined % and 1.6% respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Release of Fed Minutes

Minutes of June 13-14 Federal Open Market Committee meeting were released on Wednesday.  The Federal Reserve had provided some details on unwinding of its massive $4.5 trillion balance sheet at its policy meeting last month. Minutes showed that “several” officials supported paring back of Fed’s $4 trillion-plus bond portfolio within a “couple of months”.

Meanwhile, several Fed officials raised concerns over the impact of Fed’s policy measures on financial markets. Officials indicated willingness to hike key interest rates further this year despite recent soft readings on inflation. Even though inflation is still short of central bank's target of 2%, Fed officials believe inflation will reach its targeted level by 2018. Officials had raised benchmark federal funds rate from 1% to 1.25% at its June 13-14 meeting. Investors remained concerned about Fed’s eagerness to hike interest rates further and unwind its balance sheet amid soft readings on inflation.

Moreover, officials remained concerned that if the long term unemployment rate continues to miss its targeted level, upside for the inflation rate diminishes.

Geopolitical Tensions

Investors remained focused on geopolitical tensions emanating from North Korea’s declaration of the successful launch of an intercontinental ballistic missile.As per a spokesman for South Korea’s Ministry of National Defense, the missile travelled more than 930 kilometers. In response to North Korea’s ambitious nuclear program, the U.S. and South Korean armies carried out a joint exercise, firing surface-to-surface missiles into South Korea’s waters.

Economic Data

The factory orders in May fell 0.8%, against the consensus estimate of a decline of 0.5%. The revised figure in April recorded a decline of 0.3%.

Stocks that made Headlines

Delta’s June Passenger Unit Revenue Up 2.5%, Q2 View Bullish

Shares of Delta Air Lines DAL have impressed lately. (Read More)

GOL Linhas Issues Bullish Q2 Forecast, Stock Up

Shares of the Brazilian carrier GOL Linhas Areas Inteligentes GOL have gained 13.32% to $12.68 on Jul 5, following the bullish projection unveiled by the company for the second quarter of 2017. (Read More)

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