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Stock Market News for December 21, 2015

Decline in oil prices dragged benchmarks to the red on Friday and the Dow closed at its lowest level since October. Meanwhile, the slump in oil prices not only negatively impacted energy shares; but it also affected financial companies having exposure to loans to highly-leveraged energy companies. Friday being the "quadruple witching" day, volume was the second-highest of the year. Option expiration added to Friday's volatility. For the week, all the major indexes ended in negative territory as decline in oil prices offset a rally boosted by the Fed's rate hike decision.

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The Dow Jones Industrial Average (DJI) dropped 367.29 points or 2.1% to close at 17,128.55. The Standard & Poor's 500 (S&P 500) declined 1.8% to close at 2,005.55. The tech-laden Nasdaq Composite Index closed at 4,923.08, decreasing 1.6%. The fear-gauge CBOE Volatility Index (VIX) surged 9.3% to settle at 20.70. A total of around 2.3 billion shares were traded on Friday on the NYSE. Decliners outpaced advancing stocks on the NYSE. For 64% stocks that declined, 34% advanced.

Oil prices settled lower on Friday after U.S. oil rig count snapped a four week declining streak to rise by 17 to 541, according to Baker Hughes Incorporated ( BHI ). Increase in U.S. oil rig count came in amid concerns about abundant supply of oil. The WTI crude oil price fell 0.6% to end at $34.73 a barrel. Additionally, Brent crude oil declined 0.5% to end at $36.88 a barrel.

Decline in oil prices continued to have a negative impact on energy shares. The Energy Select Sector SPDR (XLE) declined 2.6%, the second highest among the S&P 500 sectors. Dow components Exxon Mobil Corporation ( XOM ) and Chevron Corporation ( CVX ) dropped 0.9% and 0.8%, respectively. Other key stocks from the energy sector such as Occidental Petroleum Corporation ( OXY ), ConocoPhillips ( COP ) and Schlumberger Limited ( SLB ) decreased 0.7%, 2.9% and 2.7%, respectively.

Meanwhile, financial shares took a beating on Friday as decline in oil prices adversely affected financial companies having exposure to highly-leveraged energy companies. Separately, flattening yield curve also dragged financial shares down.

The Financial Select Sector SPDR (XLF) dropped 3.3% and was the biggest loser among the S&P 500 sectors. Top holdings from the sector such as Wells Fargo & Company ( WFC ), JPMorgan Chase & Co. ( JPM ), Berkshire Hathaway Inc. ( BRK-B ), Bank of America Corporation ( BAC ) and Citigroup Inc. ( C ) decreased 3%, 2.8%, 3.3%, 3.1% and 3.1%, respectively. Overall, all 12 sectors of the S&P 500 ended in the red.

Meanwhile, trading volume was elevated on Friday due to "quadruple witching" day. A quadruple witching refers to the third Friday of every March, June, September and December. On these days, market index futures, market index options, stock options and stock futures expire, which results in increased volatility.

For the week, the S&P 500, the Dow and the Nasdaq declined 0.3%, 0.8% and 0.3%, respectively. Declines in energy and materials shares, dragged benchmarks lower for the week. Decline in oil prices had a negative impact on both energy and materials shares. U.S. crude oil price registered its lowest settlement price in nearly seven years due to concerns about abundant supply of oil.

According to the Energy Information Administration (EIA), crude supplies for the week ending Dec 11 increased by 4.8 million barrels. Meanwhile, the dollar strengthened against most of the major currencies following the Federal Reserve's decision to hike benchmark interest rates in nearly a decade. A stronger dollar also intensified the downward pressure on oil prices.

Fed policy makers unanimously voted on Wednesday to raise interest rates, which has been stuck at zero for almost a decade. The Fed said that the U.S. economy will continue to do well and a slight increase in rate was appropriate.

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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.


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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