The fifth-consecutive month of declines in German business
confidence coupled with Caterpillar's dismal earnings forecast
dragged benchmarks into the red yesterday. Both these developments
reminded investors of the frail economic scenario and offered
little reason for the markets to rebound into the green. Meanwhile,
another drop in crude prices affected the energy sector.
The Dow Jones Industrial Average (DJI) declined 0.2% to close at
13,558.92. The Standard & Poor 500 (S&P 500) dropped 0.2%
to finish yesterday's trading session at 1,459.89. The tech-laden
Nasdaq Composite Index plunged 0.6% and ended at 3,160.78. The
fear-gauge CBOE Volatility Index (VIX) gained 1.2% and settled at
14.15. Consolidated volumes on the New York Stock Exchange, the
American Stock Exchange and Nasdaq was roughly 5.54 billion shares,
which fell short of the year-to-date daily average of 6.54 billion
shares. Declining stocks outpaced the advancers on the NYSE; as for
58% stocks that dropped, 39% stocks moved higher.
A larger-than-expected decline in German business confidence in
September reminded investors about the slowdown in the global
economy. Germany's IFO Business Climate Index was down to 101.4 in
September from 102.3 in the prior month. This was not only the
fifth-straight decline, but the index reached its lowest since
early 2010. The European debt crisis remains far from resolved, and
dismal data from one of Euro-zone's strongest economies was a
matter of concern.
Dismal data out of Germany follows a bagful of discouraging
economic readings from the U.S., Europe and China released last
week. Among them, initial claims for unemployment benefits was near
a two-month high, while manufacturing suffered the weakest quarter
in three years and leading indicators declined in August in the
U.S. Separately, manufacturing activity declined in China as well
as Europe.
Separately, Caterpillar Inc. (NYSE:
CAT
), the world's largest maker of construction equipment issued a
warning that there could be a larger-than-expected decline in the
demand for its products in the upcoming years. The company cited
weaker commodity prices as the reason for the estimated fall in
demand. Eventually, the company had to revise its 2015 earnings
estimates to $12 to $18 per share, down from a prior range of $15
to $20 a share. Moreover, demand for mega trucks is expected to
fall along with lower equipment sales in Australia and China.
Caterpillar's CEO Doug Oberhelman said: "We've seen a slowing in
economic growth more than we expected…We expect fairly anemic and
modest growth through 2015". Shares of Caterpillar dropped 0.9%
following the announcement.
Meanwhile, shares of tech bellwether Apple Inc. (NASDAQ:
AAPL
) plunged 1.3% as concerns arose about whether the company can
produce and supply sufficient quantities of its iPhone 5 to meet
the huge demand in time.
Coming to the energy sector, the PHLX oil service sector index
shaved off 1.4% and prices of crude oil ended at $91.93. Concerns
about global demand have pulled down crude oil prices by over 6%
since last week. The Energy Select Sector SPDR (XLE) lost 0.5% and
stocks such as Marathon Oil Corporation (NYSE:
MRO
), Schlumberger Limited (NYSE:
SLB
), Halliburton Company (NYSE:
HAL
), Occidental Petroleum Corporation (NYSE:
OXY
) and Valero Energy Corporation (NYSE:
VLO
) plunged 1.4%, 1.0%, 1.0%, 0.7% and 0.7%, respectively.
Separately, the Utilities Select Sector SPDR (XLU) added roughly
1% and stocks including Exelon Corporation (NYSE:
EXC
), The Southern Company (NYSE:
SO
), NextEra Energy, Inc. (NYSE:
NEE
), Duke Energy Corp (NYSE:
DUK
) and Dominion Resources, Inc. (NYSE:
D
) surged 1.4%, 1.2%, 1.2%, 0.9%, 0.8%, respectively.
APPLE INC (AAPL): Free Stock Analysis Report
CATERPILLAR INC (CAT): Free Stock Analysis
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DOMINION RES VA (D): Free Stock Analysis Report
DUKE ENERGY CP (DUK): Free Stock Analysis
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EXELON CORP (EXC): Free Stock Analysis Report
HALLIBURTON CO (HAL): Free Stock Analysis
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MARATHON OIL CP (MRO): Free Stock Analysis
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NEXTERA ENERGY (NEE): Free Stock Analysis
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OCCIDENTAL PET (OXY): Free Stock Analysis
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SCHLUMBERGER LT (SLB): Free Stock Analysis
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SOUTHN COMPANY (SO): Free Stock Analysis Report
VALERO ENERGY (VLO): Free Stock Analysis Report
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