Benchmarks ended lower on Wednesday following another sharp decline in U.S. oil price and worries about a slowdown in Chinese economy. However, all major indexes closed well above session lows after a late-day recovery in WTI crude helped stocks reduce losses. Nevertheless, WTI crude ended in the red over concerns about a supply glut. Meanwhile, gains in biotech and small-cap stocks also helped indexes trim some of the losses. Traders also noted that buyers started to pour in after the S&P 500 almost touched a key technical level of 1800.
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The Dow Jones Industrial Average (DJI) declined 249.81 points or 1.6% to close at 15,766.74. The Standard & Poor's 500 (S&P 500) dropped 1.2% to close at 1,859.33. The tech-laden Nasdaq Composite Index closed at 4,471.69, decreasing 0.1%. The fear-gauge CBOE Volatility Index (VIX) surged 5.9% to settle at 27.59. A total of around 12.5 billion shares were traded on Wednesday, higher than the last 20-session average of 7.8 billion. Decliners outpaced advancing stocks on the NYSE. For 71% stocks that declined, 28% advanced.
The S&P 500 closed at its lowest level on Wednesday since Apr 15, 2014 after falling as low as 1,812.22 at one point. The Dow also ended at its lowest level since Aug 25, 2014, recovering from a 565-point-drop earlier in the day. This was its worst one day percentage drop over the last year. The Nasdaq too closed at its lowest level since Oct 2014.
Concerns about abundant supply of oil continued to drag oil prices lower. The International Energy Agency had reported on Tuesday that the world may soon drown in oversupply. Slowdown in China's economy also added to the bearish sentiment. WTI crude declined below the $27 a barrel mark, its lowest settlement level in almost 13 years. WTI crude tanked 7.2% to settle at $26.55, up slightly from an intraday low of $26.19, its lowest price since May 2003. Additionally, Brent crude dropped 3.2% to $27.88 a barrel.
Decline in oil prices adversely affected energy shares. The Energy Select Sector SPDR (XLE) declined 2.7% and was one of the biggest losers among the S&P 500 sectors. Dow components Exxon Mobil Corporation ( XOM ) and Chevron Corporation ( CVX ) dropped 4.2% and 3.1%, respectively. Other key stocks from the energy sector such as EOG Resources, Inc. ( EOG ), ConocoPhillips ( COP ) and Schlumberger Limited ( SLB ) decreased 1.2%, 4.5% and 2.8%, respectively.
Separately, the Real Estate Select Sector SPDR (XLRE) also declined 2.7%. Key stocks from the sector including Simon Property Group Inc. ( SPG ), Equity Residential ( EQR ), Equinix, Inc. ( EQIX ) and Realty Income Corporation ( O ) decreased 3.1%, 3.5%, 0.3% and 2.2%, respectively.
Meanwhile, gains in biotech and small cap stocks helped the indexes reduce losses. Key biotech stocks including Celgene Corporation ( CELG ), Gilead Sciences Inc. ( GILD ) and Regeneron Pharmaceuticals, Inc. ( REGN ) increased 4.4%, 0.7% and 3.3%, respectively. The iShares Nasdaq Biotechnology Index (IBB) gained 2.8%, while the broader Health Care Select Sector SPDR (XLV) increased 0.2%.
The health care sector was the lone sector among the S&P 500's industry groups which closed in the green. Separately, the Russell 2000 Index closed 0.5% higher on Wednesday after falling 3.7% in intraday trade.
In economic news, the U.S. Department of Commerce reported that housing starts decreased 2.5% from November to a seasonally adjusted annual rate of 1,149,000 in December, in contrast to the consensus estimate of an increase to 1,199,000. Building permits in December decreased 3.9% from November's figure to 1,232,000, less than the consensus estimate of building permits decreasing to 1,218,000.
On the earnings front, The Goldman Sachs Group, Inc.'s ( GS ) fourth-quarter 2015 earnings per share of $4.68 outpaced the Zacks Consensus Estimate of $3.79. However, shares declined almost 2% after the company's full year 2015 revenues of $33.8 billion fell 2% year over year.
Coming to Tuesday's after-market earnings, Netflix, Inc.'s ( NFLX ) fourth quarter earnings per share of 7 cents came in way ahead of the Zacks Consensus Estimate of 2 cents. However, shares of Netflix dropped 0.1% a day after the company's revenues of $1823.3 million fell short of the Zacks Consensus Estimate of $1826.8 million.
Shares of International Business Machines Corporation ( IBM ) declined 4.9% a day after the company posted fourth quarter revenues of $22.1 billion that fell slightly short of the Zacks Consensus Estimate of $22.2 billion. However, earnings of $4.84 per share in the quarter beat the Zacks Consensus Estimate of $4.76.
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