Markets ended in the red as geopolitical tensions in Ukraine and
Middle East offset upbeat earnings and weekly jobs data.
Decelerating growth in European economy also dented investor
sentiment. After adding almost 61 points in the initial hours, the
Dow declined to its lowest level since April. The Standard &
Poor 500 (S&P 500) has now declined 3.9% from the record high
achieved on Jul 24.
For a look at the issues currently facing the markets, make sure to
Ahead of Wall Street
The Dow Jones Industrial Average (DJI) declined 0.5%, to close at
16,368.27. The S&P 500 declined 0.6% to close at 1,909.57. The
tech-laden Nasdaq Composite Index closed at 4,334.97; declining
0.5%. The fear-gauge CBOE Volatility Index (VIX) rose 1.8% to
settle at 16.66. A total of 5.5 billion shares were traded
yesterday, lower than last five day's average of 6.9 billion.
Decliners outpaced advancing stocks on the NYSE. For 52% stocks
that declined, 45% advanced.
On Thursday, NATO Secretary General Anders Fogh Rasmussen and
Ukrainian Prime Minister Arseny Yatseniuk dicussed a potential
alliance to support Ukraine in its conflict with pro-Russian
separatists. The secretary demanded that Russia should withdraw its
troops from its border with Ukraine and discontinue support to
rebels. A NATO trust fund may be set up to support Kiev's command
and control abilities, communications and cyber defence.
In retaliation to the Western sanctions, Russia is likely to impose
certain import bans on goods from the Western countries. These bans
include restrictions against all food imports from the U.S. and all
fruits and vegetables import from Europe. Investors were also
concerned about the escalating Russia-Ukraine tension. On Wednesday
NATO reported that around 20,000 Russian armed troops have gathered
along the eastern border of Ukraine; increasing the possibility of
a Russian invasion.
Separately, tensions from the Middle East also kept investors
jittery. Reportedly, the US is contemplating airstrikes against the
Islamic State in Iraq and Syria (ISIS). However, the U.S. is also
planning airdrop of food and medicine for around 40,000 religious
minorities, struggling to survive extreme conditions on the top of
Discouraging economic reports from Italy, Germany and United
Kingdom continued to affect investor sentiment. Meanwhile, European
Central Bank President Mario Draghi said on Thursday that the
Russia-Ukraine tension may be a roadblock for the economic recovery
Markets had opened higher following encouraging initial claims
numbers. According to the U.S. Department of Labor, jobless claims
declined in the week ending Aug 2 to 289,000 from the previous
week's revised level of 303,000. This was lower significantly than
consensus estimate of 310,000. The 4-week moving average declined
to 293,500 from 297,500 in the previous week. The 4-week average
reached the lowest level since Feb 25, 2006.
On the earnings front, Twenty-First Century Fox, Inc. (
) reported fourth quarter fiscal 2014 adjusted earnings of 42 cents
per share, beating the Zacks Consensus Estimate of 38 cents. Strong
box office collection and steady rise in affiliate fees helped the
earnings increase nearly 35.5% year over year. Twenty-First Century
Fox was the biggest gainer among the S&P 500 companies after
gaining 5% on Thursday.
Shares of Duke Energy Corporation (
) rose 1.1% after posting adjusted second quarter 2014 earnings of
$1.11 per share, ahead of the Zacks Consensus Estimate by 11%.
Quarterly earnings also increased 27.6% from the year-ago figure of
Robust earnings from Duke Energy helped the Utilities Select Sector
SPDR (XLU) gain the most among S&P 500 sectors. The company
gained 1.2% yesterday. Key utilities stocks from the sector such as
Ameren Corporation (
), DTE Energy Company (
), Southern Company (
) and Entergy Corporation (
) increased 1.1%, 1.4%, 1.1% and 1.1%, respectively.
Mylan, Inc.'s (
) shares declined 3% after announcing second quarter 2014 earnings
(excluding special items) of 69 cents per share, missing the Zacks
Consensus Estimate by a penny. The drug company also reported
second quarter revenues of $1.84 billion, marginally short of the
Zacks Consensus Estimate of $1.9 billion. The company expects
adjusted earnings per share in the band of 90 cents to 95 cents in
the third quarter of 2014. The guidance is below the Zacks
Consensus Estimate of $1.04.
Mylan's discouraging earnings results had a negative impact on the
Health Care Select Sector SPDR ETF (XLV). The sector was the
biggest loser among the S&P 500 sectors after it declined 1.3%.
Key healthcare stocks from the sector such as UnitedHealth Group
), Pfizer Inc. (
), Cigna Corp. (
) and Humana Inc. (
) decreased 2.8%, 0.9%, 3% and 3.4%, respectively.
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