Wednesday, Feb 8, 2017
U.S. equities closed mixed Wednesday as financials led decliners, while oil rebounded following the release of key supply data.
The Dow Jones industrial average fell about 35 points, with Goldman Sachs contributing the most losses. Apple, another Dow component, traded near its all-time high. The index had fallen about 75 points at session lows.
The S&P 500 dropped held just above breakeven, with real estate outperforming and financials falling 0.7 percent. The Nasdaq composite traded 0.15 percent higher.
Pressuring the financials sector were bank stocks, as the SPDR S&P Bank ETF (KBE) and the Regional Banking ETF (KRE) dropped around 1 percent, posting a three-day losing streak. Bank stocks have been some of the best performers since President Donald Trump’s election, as market participants bet on corporate tax cuts, deregulation and government spending.
“A deviation from that will be perceived as a negative,” said Rob Bartenstein, CEO of Kestra Private Wealth Services. “My overarching belief here is that this policy grind — where we shift from expectation to implementation — will bring some volatility into the market.”
Recently, however, equities have mostly traded in a tight range, as market participants seek out more details regarding Trump’s policies.
“It’s almost like we’re caught in a swamp. The market just can’t seem to move one way or the other,” said Ryan Detrick, senior market strategist at LPL Financial. “Earnings and economic news have been pretty good, … but, at the same time, the market is looking at Washington out the corner of its eye.” He also noted the S&P was on track to post its 37th straight day without a 1 percent trading range.
Investors also focused on oil prices, with crude futures for March delivery rising 0.33 percent to settle at $52.34 a barrel, with the Energy Information Administration reporting a 13.8 million barrels increase in oil inventories. The American Petroleum Institute said Tuesday that inventories rose by 14.2 million barrels the week of Feb. 3, sharply above the expected 2.5 million barrels increase.
“The resurgence of U.S shale amid the rising oil could undermine the efforts of OPEC and Non-OPEC members in mitigating the global oversupply consequently leaving oil prices vulnerable,” said Lukman Otunuga, research analyst at FXTM, in a note. “There is a threat of the OPEC production cut deal falling apart in the future if U.S shale continues to pump incessantly.”
WTI had traded about 1 percent lower shortly after the EIA’s release before turning positive.
“We’ve had pretty steady oil prices for a while, but we’ve gotten some volatility recently,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab. “But in general, it doesn’t become a drag or a benefit on the market as long as it stays in that $50-to-$55 range.”
The S&P energy sector led decliners Tuesday, capping gains in the overall stock market. The Dow and Nasdaq hit record highs Tuesday.
“At the same time, you’re seeing capital being allocated into other areas of the market, such as metals,” said Adam Sarhan, CEO of 50 Park Investments.
Metals futures were all up more than 1 percent for the week. Gold futures for April delivery gained $3.40 to settle at $1,239.50 per ounce. “I look at buying gold as buying stocks back in March of 2009,” said Sarhan, noting valuations for the precious metal are stretched to the downside.
There are no major economic data due Wednesday, but investors kept a close eye on earnings.
Allergan, GlaxoSmithKline, Time Warner and Alaska Air are among the major companies that reported earnings before the bell. Whole Foods, CenturyLink, Fiserv and Prudential Financial are all due to report after the market close.
Dow component Walt Disney posted mixed quarterly results Tuesday after the close, as earnings per share topped analyst expectations while sales fell short.
As of Wednesday morning, 64 percent of S&P 500 companies had posted quarterly results, with 69 percent of those firms topping earnings estimates, while 52 percent have beaten sales expectations, according to data from The Earnings Scout.
U.S. Treasurys held higher after a $23 billion auction of 10-year notes, which saw weak demand, with the benchmark 10-year note yield falling to 2.364 percent and the short-term two-year note holding near 1.161 percent.
The Dow Jones industrial average fell 34 points, or 0.17 percent, to 20,055, with JPMorgan Chase leading decliners and Nike the top riser.
The S&P 500 rose 1 point, or 0.05 percent, to 2,294, with real estate leading seven sector higher and financials lagging.
The Nasdaq composite gained 6 points, or 0.12 percent, to 5,680.
Advancers were a step ahead of decliners at the New York Stock Exchange, with an exchange volume of 431 million and a composite volume of 2.143 billion in afternoon trade.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 11.3.
On tap this week:
Earnings: Suncor, Lions Gate, Owens Corning, Sanofi, Level 3 Communications, Jacobs Engineering
Earnings: Coca-Cola, Kellogg, Twitter, Yum Brands, Beazer Homes, Cummins, Total, Agrium, Occidental Petroleum, Nissan, Borg Warner, Dunkin Brands, Expedia, News Corp, Nvidia, Pandora Media, Activision Blizzard, Thomson Reuters, KKR
8:30 a.m. Initial claims
9:10 a.m. St. Louis Fed President James Bullard
10:00 a.m. Wholesale trade
1:00 p.m. 30-year bond auction
1:10 p.m. Chicago Fed President Charles Evans
Earnings: Aon, Calpine, Buckeye Partners, ArcelorMittal, Ventas, Nippon Telegraph, Interpublic
8:30 a.m. Import prices
10:00 a.m. Consumer sentiment
2:00 p.m. Factory orders