Benchmarks closed lower on Tuesday, dragged down by declines in drug shares. Pharmaceutical companies nosedived after President Trump tweeted that he is working on a way to drop prices for medicines. The U.S. dollar, in the meantime, strengthened against most of its currency rivals on looming rate hike expectations. On the data front, U.S. trade deficit jumped in January to the highest level in nearly five years to $48.5 billion.
For a look at the issues currently facing the markets, make sure to read today's Ahead of Wall Street article.
The Dow Jones Industrial Average (DJI) declined 0.1% to close at 20,924.76. The S&P 500 fell 0.3% to close at 2,368.39. The tech-laden Nasdaq Composite Index closed at 5,833.93, decreasing 0.3%. The fear-gauge CBOE Volatility Index (VIX) gained 1.4% to settle at 11.40. A total of around 6.44 billion shares were traded on Tuesday, less than the last 20-session average of 6.92 billion shares.
Shares of large US pharmaceutical and biotechnology companies came under pressure after Trump tweeted that he was working on a "new system" to reduce drug prices in the industry. He, however, didn't provide much detail. Trump, meanwhile, backed a draft bill unveiled by Republicans to repeal and replace the Obamacare healthcare law but said that it was still open to negotiation.
Companies including Boston Scientific Corporation ( BSX ), Zimmer Biomet Holdings, Inc. ( ZBH ), Regeneron Pharmaceuticals, Inc. ( REGN ) and Intuitive Surgical, Inc. ( ISRG ) dropped 1.1%, 0.1%, 2.5% and 0.8%, respectively. The broader Health Care Select Sector SPDR (XLV) decreased 0.7% and was one of the major decliners among the S&P 500 sectors. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
The ICE Dollar Index rose as much as 0.4% to settle at 100.28 late on Mar 7. The dollar, which drifted lower in the past two months after hitting a 14-year high in mid-December, is showing signs of strength. The dollar had already been able to break out above its major resistance level of 100, with several traders saying that such a resistance level has become support.
The dollar strengthened against most of its currency rivals on looming rate hike expectations. Yellen indicated that a rate hike is in the offing this month with more slated to follow later this year, in a speech to The Executive's Club of Chicago. She said that the "Federal Open Market Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the Federal funds rate would likely be appropriate". The language is similar to what Fed has used in the past to signal a rate hike. Fed officials, including some dovish members, also reiterated that a March interest rate increase is 'on the Table'.
Based on CME Group 30-Day Fed Fund futures prices, which have long been used to express the market's views on the likelihood of changes in U.S. monetary policy indicate an 84% chance of a rate hike this month.
Stocks That Made Headlines
Urban Outfitters Inc. ( URBN ) posted lower-than-expected earnings, when the company reported fourth-quarter fiscal 2017 results. Further, the company's top-line fell short of the Zacks Consensus Estimate for the second consecutive quarter. ( Read More )
Despite a challenging retail landscape, DICK'S Sporting Goods Inc. ( DKS ) released solid fourth-quarter fiscal 2016 results, wherein both sales and earnings surpassed expectations and improved year over year, with earnings marking its fourth successive beat. ( Read More )
Continuing its acquisition spree, Hewlett Packard Enterprise Company ( HPE ) recently announced entering into a definitive agreement to acquire the data storage provider, Nimble Storage Inc. ( NMBL ). ( Read More )
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