Slide in prices of commodities including oil and copper dragged down energy and materials shares, which in turn pushed major benchmarks into negative territory on Thursday. Meanwhile, heightening possibilities of a rate hike in December amid comments from some Fed officials also dampened investor sentiment. While both the Dow and S&P 500 registered their biggest one-day losses since Sep 28, the S&P 500 finished in the red for the year following yesterday's losses.
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The Dow Jones Industrial Average (DJI) dropped 1.4%, or 254.15 points, to close at 17,448.07. The Standard & Poor's 500 (S&P 500) also lost 1.4% to close at 2,045.97. The tech-laden Nasdaq Composite Index closed at 5,005.08, declining 1.2%. The fear-gauge CBOE Volatility Index (VIX) surged 14.4% to settle at 18.37. A total of around 7.1 billion shares were traded on Thursday, in line with the last 20-session average. Decliners outpaced advancing stocks on the NYSE. For 79% stocks that declined, 18% advanced.
On Thursday, the U.S. Energy Information Administration reported that crude inventories for the week ending Nov 6 increased 4.2 million barrels to 487 million barrels. This was preceded by an increase of 2.8 million barrels in earlier week. Rise in crude inventories increased concerns regarding over-supply of oil, which in turn had a negative impact on oil prices . Prices of WTI crude oil and Brent crude oil plunged 2.8% and 4% to $41.75 a barrel and $44.06 per barrel, respectively. Price of WTI have dropped around 10% this month and is on track to witness its biggest monthly drop since July.
Drop in oil prices dragged down the Energy Select Sector SPDR (XLE) by 2.3%, making it the worst performer among the S&P 500 sectors. Shares of the Dow components - Exxon Mobil Corporation ( XOM ) and Chevron Corporation ( CVX ) declined 2.7% and 2.5%, respectively. Other key stocks from the sector including Kinder Morgan, Inc. ( KMI ), Williams Companies, Inc. ( WMB ) and ConocoPhillips ( COP ) lost 3.9%, 3.4% and 2.8%, respectively.
Meanwhile, price of gold declined 0.4% to $1,080.80 per ounce, reaching its lowest level since Feb 2010. Also, price of copper hit a fresh six-year low on Thursday. Decline in commodity prices had a negative impact on the Materials Select Sector SPDR (XLB), which declined 2% and was the second biggest loser among the S&P 500 sectors. Key stocks from the sector including E. I. du Pont de Nemours and Company ( DD ), The Dow Chemical Company ( DOW ), LyondellBasell Industries N.V. ( LYB ), Alcoa Inc. ( AA ) and Freeport-McMoRan Inc. ( FCX ) declined 1.3%, 2.5%, 2.7%, 3.2% and 5.8%, respectively.
Meanwhile, comments from some of the Fed officials raised concerns regarding a rate-hike possibility in December. Though Fed Chairwoman Janet Yellen avoided commenting on the timing of a rate hike, important Fed officials including William Dudley, Charles Evans and Jeffrey Lacker indicated that there is a possibility of a lift-off in December.
President of the New York Fed, William Dudley said: "I think it is quite possible that the condition the Committee has established to begin to normalize monetary policy could soon be satisfied… The economy looks to be in decent shape and is likely to continue to grow at a slightly above-trend pace."
Moreover, Chicago Fed President Charles Evans remained positive regarding economic growth. He expects the economy to grow that a moderate pace of 2.5% over the next one and a half years. He also stated that though "the outlook for inflation remains too low, a gradual path of normalization would balance both the various risks to my projections for the economy's most likely path and the costs that would be involved in mitigating those risks."
Also, Richmond Fed President Jeffrey Lacker said: "it does look like the recent data, and particularly the October employment report, has strengthened the case for raising rates. I've thought the case was strong for over six months now. I'm hoping I can be more persuasive in December." He had voted in favor of a lift-off in both September's and October's meetings. Meanwhile, St. Louis Fed President James Bullard said that he thinks both unemployment and inflation targets have been attained and there is a high possibility of a rate-hike in the near term.
Separately, shares of Advance Auto Parts Inc. ( AAP ) plunged 15.4% after reporting third quarter earnings per share of $1.95, missing the Zacks Consensus Estimate of $2.06. Revenues of $2.29 billion also came in lower than the Zacks Consensus Estimate of$2.33 billion. Moreover, the company now expects earnings per share in the range of $7.75-$7.90 in fiscal 2015, down from the previous forecast of $8.10-$8.30. Advance Auto Parts was the biggest decliner among the S&P 500 companies.
However, Kohl's Corp.'s ( KSS ) shares jumped 6.1% after announcing third quarter earnings of 75 cents per share, easily beating the Zacks Consensus Estimate of 69 cents. The company's net sales of $4.427 billion also outpaced the Zacks Consensus Estimate of $4.410 billion. Kohl's was the best performer among the S&P 500 companies yesterday.
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