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Midday Update: Stocks Defensive on Oil, Hawkish Fed Comments

Stocks were marginally lower in midday trade on Friday, turning defensive on a reversal in oil and hawkish comments from another member of the Federal Reserve. The Dow Jones Industrial Average and S&P 500 are marginally lower while the Nasdaq is clinging to the flatline.

Stocks turned defensive this morning in sympathy with oil futures which are lower for the first time in seven days, as well as on heavy losses in the utility and telecom sectors on expectations for interest rates to climb later this year.

Both sectors are adversely impacted from higher rates because of their capital-intensive investment needs and interest-rate sensitivity among yield-hungry investors.

The possibility for a September tightening was rekindled by San Francisco Fed president John Williams who favors a rate hike "sooner rather than later," echoing a similar sentiment made by NY Fed president William Dudley earlier this week. Williams is afraid that by waiting too long "risks having to slam on the monetary policy brakes...throwing the economy into reverse to undo the damage of overshooting the mark." Williams' remarks were made after the close on Thursday at an economic conference in Alaska. Williams is a non-voting member of the Fed this year but is considered to be influential with Chair Janet Yellen.

In corporate news, Q2 earnings season continued to wind down with a few more heavy hitters reporting. Foot Locker ( FL ), Deere ( DE ) and Applied Materials ( AMAT ) reported upbeat Q2 results, while Estee Lauder ( EL ) beat EPS estimates but issued a weak earnings forecast for FY16, and Gap ( GPS ) lowered its EPS forecast for FY16 as same-store sales growth was negative.

European shares were also lower with Italian banks remaining under pressure, and German automakers undermined by Volkswagen's downgrade at Goldman Sachs, and decision to halt production at its main factory due to a shortfall in parts. As a result, the major EU indices are all down, including the Euro-Stoxx which is lower by 0.83%.

Crude oil was down $0.01 to $48.21 per barrel. Natural gas was down $0.09 to $2.62 per 1 million BTU. Gold was down $8.70 to $1,348.40 an ounce, while silver was down $0.38 to $19.37 an ounce. Copper was unchanged at $2.18 per pound.

Among energy ETFs, the United States Oil Fund was down 0.04% to $11.30 with the United States Natural Gas Fund was down 3.38% to $7.71. Among precious-metal funds, the Market Vectors Gold Miners ETF was down 2.28% to 30.05 while SPDR Gold Shares were down 0.72% to $128.19. The iShares Silver Trust was down 1.87% to $18.42.

Here's where the markets stand at mid-day:

US MARKETS

NYSE Composite Index was down 44.78 points (-0.41%) to 10,818.68

Dow Jones Industrial Index was down 35.10 points (-0.18%) to 18,563.56

S&P 500 was down 5.40 points (-0.25%) to 2,181.57

Nasdaq Composite Index was down 1.36 points (-0.03%) to 5,238.54

GLOBAL SENTIMENT

FTSE 100 was down 10.01 points (-0.15%) to 6,858.95

DAX was down 58.67 points (-0.55%) to 10,544.36

CAC 40 was down 36.54 points (-0.82%) to 4,400.52

Nikkei 225 was up 59.81 points (+0.36%) to 16,545.82

Hang Seng Index was down 85.94 points (-0.37%) to 22,937.22

Shanghai China Composite Index was up 4.61 points (+0.15%) to 3,108.72

NYSE SECTOR INDICES

NYSE Energy Sector Index was down 110.79 points (-1.02%) to 10,776.83

NYSE Financial Sector Index was down 22.71 points (-0.36%) to 6,216.16

NYSE Healthcare Sector Index was down 57.44 points (-0.47%) to 12,811.92

UPSIDE MOVERS

(+) NWY (+13.66%) Extended gains from Thursday's after hours session after reporting better-than-expected Q2 results and guiding a narrower Q3 operating loss compared to a year earlier.

(+) RH (+8.55%) Upgraded at Goldman Sachs to conviction buy from neutral

(+) AMAT (+7.04%) Reported better-than-expected FQ3 results, issued upbeat Q4 guidance

DOWNSIDE MOVERS

(-) PSTG (-14.62%) Downgraded at OTR to negative from positive

(-) TUES (-4.10%) Reported narrower-than-expected FQ4 loss, but revenue misses estimates

(-) EL (-2.62%) Reversed early pre-market session gains after beating core earnings for Q4 but guiding Q1 and full year EPS below the CapIQ mean

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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