Weak economic data out of China and slump in biotech stocks dragged down benchmarks into negative territory on Tuesday. Moreover, another drop in oil prices weighed on energy shares. Meanwhile, concerns regarding earnings growth in the third quarter dampened investor sentiment ahead of major earnings releases. The Dow snapped its seven days winning streak, which was the longest since last December.
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The Dow Jones Industrial Average (DJI) lost 0.3% to close at 17,081.89. The Standard & Poor's 500 (S&P 500) declined 0.7% to close at 2,003.69. The tech-laden Nasdaq Composite Index closed at 4,796.61, losing nearly 0.9%. The fear-gauge CBOE Volatility Index (VIX) surged 9.3% to settle at 17.67. A total of around 6.1 billion shares were traded on Tuesday, lower than the last 20-sessions' average of 7.5 billion. Decliners outpaced advancing stocks on the NYSE. For 71% stocks that declined, 27% advanced.
Disappointing Chinese trade data indicated that the world's second largest economy is finding it difficult to recover from the sluggish growth environment. China's General Administration of Customs reported that country's imports plunged by wider-than-anticipated rate of 20.4% in September form the year-ago level, compared to a decline of 13.8% in August. It also reported that exports decreased 3.7% last month, preceded by a drop of 5.5% in August. The report showed that China's trade surplus increased from $60.2 billion in August to $60.3 billion in September. It is speculated that weak global demand is weighing on China's trade numbers and may not be able to achieve the country's targeted annual growth rate of 7% this year.
Meanwhile, decline in biotech and healthcare stocks had a negative impact on benchmarks yesterday. A drop of 3.2% in the iShares Nasdaq Biotechnology (IBB) was one of the main reasons behind the decline in the Nasdaq. The broader Health Care Select Sector SPDR (XLV) lost nearly 1.3% and was the worst performer among the S&P 500 sectors. Key stocks from the sector including Alexion Pharmaceuticals, Inc. ( ALXN ), Regeneron Pharmaceuticals, Inc. ( REGN ), Amgen Inc. ( AMGN ), Mylan N.V. ( MYL ) and Vertex Pharmaceuticals Incorporated ( VRTX ) dropped 4.1%, 3.6%, 3.6%, 3.5% and 3.4%, respectively.
Moreover, the International Energy Agency (IEA) forecasted that global demand for oil will decline to 1.2 million barrels a day in 2016, compared to 1.8 million barrels per day in 2015. Though EIA predicted that non-OPEC oil production will decline by 500,000 barrels per day next year following slump in oil prices and reduction in spending, the OPEC countries gave little indication to reduce their production.
This had a negative impact on oil prices, which in turn pushed the energy share into negative territory yesterday. Prices of WTI crude oil and Brent crude oil declined 0.9% and 1.3% to $46.66 per barrel and $49.24 a barrel, respectively. The Energy Select Sector SPDR (XLE) dropped more than 1%. Key energy stocks including Kinder Morgan, Inc. ( KMI ), Phillips 66 ( PSX ), Williams Companies, Inc. ( WMB ), Valero Energy Corporation ( VLO ) and Tesoro Corporation ( TSO ) lost 2.5%, 2%, 2.7%, 3.6% and 3.4%, respectively.
Also, shares of Ryder System, Inc. ( R ) plunged 9.3% after forecasting full-year earnings per share between $6.17 and $6.29, unfavorably compared to previously guided range of $6.45 to $6.55. It was the biggest one-day decline since Jun 2012. Ryder was also the worst performer among the S&P 500 companies.
However, Molson Coors Brewing Company's ( TAP ) shares surged 9.9% after Anheuser-Busch InBev SA/NV ( BUD ) reached an agreement to acquire its main competitor SABMiller for over $104 billion. The combined company will be the largest beer maker in the world. Shares of Anheuser-Busch InBev also rose 2.1% following the agreement. Molson Coors Brewing was biggest gainer among the S&P 500 companies on Tuesday.
Separately, mixed third quarter results from Johnson & Johnson ( JNJ ) raised concerns about the earnings growth in third quarter earnings season. The company reported third quarter sales of $17.1 billion, missing the Zacks Consensus Estimate of $17.4 billion and declining 7.4% year on year. Though J&J's third quarter earnings per share of $1.49 beat the Zacks Consensus Estimate of $1.44, it was down 7.5% from the year-ago period. Currency headwind emerged as the main reason behind dismal third quarter results. Shares of the company declined nearly 0.6% following the earnings report.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.