Benchmarks ended in the red on Tuesday following a late selloff
primarily due to mounting tension in Iraq. The blue-chip index
suffered its biggest drop in over a month. The S&P 500 settled
in negative territory after touching an intra-day all time high of
1968.17. The day's initial gains, largely a result of encouraging
home sales data and an improvement in consumer confidence, were
eroded by the end of the trading session.
For a look at the issues currently facing the markets, make sure to
Ahead of Wall Street
The Dow Jones Industrial Average (DJI) declined 0.7% to close
Tuesday's trading session at 16,818.13. The Standard & Poor 500
(S&P 500) dropped 0.6% to finish at 1,949.98. The tech-laden
Nasdaq Composite Index dropped 0.4% to 4,350.36. The fear-gauge
CBOE Volatility Index (VIX) surged 10.5% to settle at 12.13. Total
volume for the day was roughly 5.69 billion shares, higher than
this month's average of 5.61 billion. Decliners outpaced advancing
stocks on the NYSE. For 61% stocks that declined, 36% advanced.
Benchmarks reversed course post noon to settle in the red on
Tuesday. Escalating tension in Iraq was cited as the primary reason
that led to the selloff. U.S. Secretary of State John Kerry met
officials from Iraq's semi-autonomous Kurdish region capital of
Arbil. Kerry said: "This is a very critical time for Iraq and the
government formation challenge is the central challenge that we
face." He added Kurdish forces were "really critical in helping to
draw a line with respect to ISIL."
The Sunni insurgents are led by the Islamic State of Iraq and the
Levant (ISIL). According to the United Nations, the sectarian
clashes have led to the killing of about 1075 people and wounded
another 658 people between June 5 and 22. The onslaught has
alarmed world leaders and has put tremendous pressure on the Prime
Minister of Iraq, Nouri al-Maaliki, to take action against the
Meanwhile, Kerry's talks came in at a time when Iraqi forces were
able to hold off assaults on the country's largest oil refinery at
Baiji, north of Baghdad. The oil refinery provides almost 50% of
domestic refined petroleum products. Repeated assaults on the
complex by the militants have sent jitters across world markets.
Further, Iraq's security forces along with allied tribal fighters
defended a militant attack on the strategic western town of Haditha
in Anbar province.
The turmoil in Iraq led to a rise in U.S. Brent oil price. Brent
crude oil price increased $0.34 to settle at $114.46 a barrel. U.S.
crude for August delivery also rose by 0.7% to settle at $106.76 a
Early in the session, investors were enthused by positive economic
data. The U.S. Census Bureau and the Department of Housing and
Urban Development reported upbeat new single-family home sales.
Sales of new single-family houses increased 18.6% from April's
revised rate of 425,000 to seasonally adjusted annual rate of
504,000 in May. This surge in new home sales in May touched the
highest annual level in six years. The rise was also larger than
expected as the consensus estimate predicted it would improve to
S&P/Case-Shiller Home Price Indices data was somewhat mixed.
The 20-City composite index rose 10.8% year on year in April.
However, the rate of growth was down from March's year-on-year rise
of 12.4%. Key housing stocks such as Lennar Corp. (NYSE:
), PulteGroup, Inc. (NYSE:
), Beazer Homes USA Inc. (NYSE:
), KB Home (NYSE:
) and DR Horton Inc. (NYSE:
) increased 1.4%, 0.3%, 1.9%, 1.0% and 1.2%, respectively.
Separately, the Conference Board reported that the Consumer
Confidence Index has improved from May's 82.2 to 85.2 in June. The
rise in consumer confidence was larger than consensus estimate of
an increase to 83.6. The Present Situation Index increased to 85.1
in June from 80.3 in May. The Expectations Index was at 85.2 in
June compared to 83.5 in May.
Seven out of 10 sectors of the S&P 500 ended in the red. The
energy sector declined the most among the S&P industry groups.
The Energy Select Sector SPDR (XLE) declined 2.1%. Key energy
stocks such as Exxon Mobil Corporation (NYSE:
), Chevron Corporation (NYSE:
), Schlumberger Limited (NYSE:
), Halliburton Company (NYSE:
), Transocean Ltd. (NYSE:
) and ConocoPhillips (NYSE:
) dropped 1.6%, 0.9%, 1.8%, 3.1%, 2.8% and 1.5%, respectively.
The Industrial Select Sector SPDR (XLI) declined 1.0%, the second
highest among the S&P 500 sectors. Key stocks from the
industrial sector such as General Electric Company (NYSE:
), United Technologies Corp. (NYSE:
), Union Pacific Corporation (NYSE:
), The Boeing Company (NYSE:
) and 3M Company (NYSE:
) dropped 0.4%, 1.2%, 1.0%, 1.3% and 0.7%, respectively.
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