Stock Market News for September 28, 2015

Benchmarks finished mixed on Friday despite a triple-digit gain in the Dow as another slump in biotech shares offset Nike's robust earnings results and the Fed Chairwoman Janet Yellen's encouraging speech. While, strong earnings results from Nike boosted the Dow on Friday, continuing plunge in biotech shares dragged down the S&P 500 and Nasdaq in the negative territory. Moreover, strong second quarter GDP data failed to boost benchmarks. Meanwhile, the Dow, S&P 500 and Nasdaq ended in the negative territory for the week.

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The Dow Jones Industrial Average (DJI) gained 0.7%, or 113.35 points, to close at 16,314.67. However, the Standard & Poor's 500 (S&P 500) lost nearly 0.1% to close at 1,931.34. The tech-laden Nasdaq Composite Index closed at 4,686.50, declining 1%. The fear-gauge CBOE Volatility Index (VIX) rose 0.6% to settle at 23.62. A total of around 7.2 billion shares were traded on Friday, lower than the last 20-sessions' average of 7.4 billion. Decliners outpaced advancing stocks on the NYSE. For 51% stocks that declined, 46% advanced.

Decline in biotech stocks erased some of the day's earlier gains. U.S. Democratic presidential candidate Hillary Clinton's comment to prevent "price gouging" for specialty drugs last Monday continued to weigh on biotech and healthcare stocks. Another massive sell-off in this sector dragged down iShares Nasdaq Biotechnology (IBB) by 4.9% on Friday. Moreover, the index registered a weekly loss of 13.2%, witnessing its worst weekly performance in seven years.

Also, the Health Care Select Sector SPDR (XLV) plunged 2.7% on Friday and was the worst performer among the S&P 500 sectors. Key health care stocks including Vertex Pharmaceuticals Incorporated ( VRTX ), Regeneron Pharmaceuticals, Inc. ( REGN ), Alexion Pharmaceuticals, Inc. ( ALXN ) and Amgen Inc. ( AMGN ) lost 7.1%, 6%, 5% and 1.8%, respectively.

Meanwhile, Janet Yellen's encouraging comments on Thursday regarding a rate hike this year had led to initial gains. Late Thursday, Yellen indicated that the lift-off option is very much on the table later this year. She was also optimistic about the US economy. She said that FOMC members "expect that the various headwinds to economic growth ... will continue to fade, thereby boosting the economy's underlying strength."

She added: "Most FOMC participants, including myself, currently anticipate that achieving these conditions will likely entail an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter." She also projected the inflation rate to touch the targeted rate of 2% in next few years and said that global growth worries will have a little impact on the US economy. A no-hike decision in the last FOMC meeting triggered concerns about the economic health in the US. It is speculated that Yellen's speech reduced the concerns to some extent, which in turn boosted investor sentiment.

Possibilities of rate hike following Yellen's comment had a positive impact on the Financial Select Sector SPDR (XLF), which gained nearly 1.5% on Friday. It was also the biggest gainer among the S&P 500 sectors. Key financial stocks including Bank of America Corporation ( BAC ), Wells Fargo & Company ( WFC ), JPMorgan Chase & Co. ( JPM ) and Citigroup Inc. ( C ) gained 2.2%, 1.8%, 2.1% and 2.9%, respectively. Six out of 10 S&P 500 sectors finished in the green on Friday.

Separately, better-than-expected second quarter GDP report indicated that the US economy is back on track after witnessing sluggish growth in the first quarter. According to "third estimate" released by the U.S. Department of Commerce reported on Friday, the economy grew at a pace of 3.9%, higher than the consensus estimate and previously projected growth of 3.7%. It was also significantly higher than first quarter's sluggish growth rate of 0.6%. According to the report, increasing consumer spending and non-residential investment played major roles in boosting the economy in the second quarter.

Moreover, shares of NIKE, Inc. ( NKE ) jumped 8.9% after reporting fiscal first quarter earnings per share of $1.34, surging nearly 23% year over year and beating the Zacks Consensus Estimate of $1.19. Net sales of this sportswear retailer advanced 5.4% to $8,414 million in the quarter and beat the Zacks Consensus Estimate of $8,215.9 million. A healthy increase in revenue from China played an important role in boosting the company's quarterly earnings results. Nike contributed nearly 68 points in the Dow's gains on Friday. It was also the best performer among the S&P 500 companies.

Additionally, according to the University of Michigan, the final reading of consumer sentiment index came in at 87.2 in September, higher than the consensus estimate of 87. It was also higher than the preliminary reading of 85.7. However, the reading was below August's final reading of 91.9.

For the week, the Dow, S&P 500 and Nasdaq declined 0.4%, 1.4% and 2.9%, respectively.

Though major benchmarks started the week in the positive territory following Dennis Lockhart's willingness to raise rates this year, they failed to remain in the territory by the end of the week. Slump in biotech and health care stocks was the major drag on the S&P 500 and Nasdaq through the week. Meanwhile, a 9.6% weekly decline in Caterpillar Inc.'s ( CAT ) shares dragged down the Dow in negative territory for the week. The company announced a restructuring program on Thursday, which includes trimming 10,000 jobs by the end of 2018.

Meanwhile, disappointing Chinese economic data including plunge in manufacturing activity and Asian Development Bank's (ADB) weak economic outlook for China dampened investor sentiment. Also, Volkswagen's ( VLKAY ) alleged scandal related to vehicle emission tests and weak economic data including existing home sales, initial claims and durable orders also weighed on benchmarks.

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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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