Credit: Shutterstock photoBenchmarks ended in the red on Friday following slump in oil prices , which dragged energy stocks downward. Oil prices declined following concerns about whether the production freeze meeting on Sunday would have any significant impact on the global crude supply glut. Meanwhile, a decline in shares of Apple also had a negative impact on the benchmarks. However, the key U.S. indexes advanced for the week following better-than-expected earnings results in financial companies. The Dow posted its best percentage weekly gains since March 18.
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The Dow Jones Industrial Average (DJI) decreased 0.2%, to close at 17,897.46. The tech-laden Nasdaq Composite Index closed at 4,938.22, also losing 0.2%. The S&P 500 fell 0.1% to close at 2,080.73. The fear-gauge CBOE Volatility Index (VIX) increased 5.9% to settle at 14.53. A total of around 6.6 billion shares were traded on Friday, lower than the last 20-session average of 7 billion shares. Advancers outpaced declining stocks on the NYSE. For 51% stocks that advanced, 45% declined.
Oil prices declined on Friday following concerns over the extent to which Sunday's crude production meeting between major oil producing nations could control global crude oversupply. At present, the market for crude is suffering from an excess supply of nearly 1.5 million barrels per day. Doubts remained as to whether freezing output could actually have an impact on the demand-supply mismatch.
Oil prices slumped further on news that Iran's OPEC governor Hossein Kazempour Ardebili will attend the Doha meeting instead of its oil minister Bijan Namdar Zangeneh. Iran's unwillingness to freeze oil output had a negative impact on investor sentiment. Both the WTI crude and Brent crude fell 2.8% and 1.7% to $40.36 per barrel and $43.10 a barrel, respectively.
However, Baker Hughes ( BHI ) reported that U.S. oil rig count posted its fourth straight weekly drop, declining from 354 to 351, its lowest level since Nov 2009.
Overall decline in oil prices dragged energy stocks downward. The Energy Select Sector SPDR (XLE) decreased 1.4% and was the biggest loser among the S&P 500 sectors. Dow components Chevron Corp ( CVX ) and Exxon Mobil Corp ( XOM ) fell 0.8% and 0.5%, respectively. Other key energy stocks including, Schlumberger Limited ( SLB ), Valero Energy Corporation ( VLO ), Occidental Petroleum Corporation ( OXY ), Pioneer Natural Resources Co. ( PXD ), EOG Resources ( EOG ) and ConocoPhillips ( COP ) declined 1.2%, 3.4%, 2.8%, 3.7%, 2.7% and 1.2%, respectively.
Moreover, shares of Apple Inc. ( AAPL ) dropped 2% after Japan's Nikkei newspaper reported that sluggish sales may force the company to reduce iPhone production levels for the quarter April-June after a similar cut in the last quarter. Apple reduced its iPhone production by around 30% during the first quarter. The report had a negative impact on technology stocks, which in turn dragged the tech-heavy index Nasdaq downward.
In earnings news, shares of Citigroup Inc. ( C ) fell 0.1% after the bank's first-quarter earnings and revenues fell on a year over year basis. The company's earnings of $1.11 per share for the quarter declined 26% year-on-year. Adjusted revenues of Citigroup decreased 11% year over year to $17.56 billion, missing the Zacks Consensus Estimate of $17.79 billion. However, the company's earnings for the quarter outpaced the Zacks Consensus Estimate of $1.04.
In economic news, the Board of Governors of the Federal Reserve System reported that industrial production decreased 0.6% in March, registering sixth decline in seven months. The fall in industrial production in March was wider than the consensus expectation of 0.1% decline. Also, capacity utilization declined from 75.3% to 74.8% last month, lower than the consensus expectations of 75.4%. Capacity utilization reached its lowest level since Aug 2010.
The final reading of consumer sentiment index released by University of Michigan came in at 89.7 in April, lower than the consensus estimate of 91.7. This was also lower than March's reading of 91.
In contrast, the Empire State Manufacturing Survey Index came in at a positive 9.56 in April, higher than 0.62 in March. This was also significantly higher than the consensus estimate of 3.5.
For the week, the Dow, S&P 500 and Nasdaq advanced 1.8%, 1.6% and 1.8%, respectively. Gains in financial and bank stocks had a positive impact on U.S. markets. Moreover, rally in oil prices for the week also boosted investor sentiment.
Better-than-expected earnings results from JPMorgan Chase & Co. ( JPM ) and Wells Fargo & Company ( WFC ) boosted the financial sectors and banking stocks. The Financials Services Select Sector SPDR (XLFS) and the SPDR S&P Bank ETF (KBE) rose 4.8% and 7.2%, respectively, for the week. Though Bank of America Corporation ( BAC ) posted weaker-than-expected earnings results, fall in its expenses and increase in loans cheered investors.
Meanwhile, Alcoa Inc. ( AA ) officially started the first quarter earnings season. Alcoa's earnings of 7 cents beat the Zacks Consensus Estimate of 2 cents. However, revenues of $4,947 million missed the Zacks Consensus Estimate of $5,274 million.
During the week, optimism over the crude production freeze meeting in Doha between both OPEC and non-OPEC members boosted oil prices.
Separately, decrease in initial claims, and rise in both Consumer Price Index (CPI) and core CPI also boosted investor sentiment. Also, all the 12 districts indicated moderate growth in economic activity, according to the Fed's Beige Book.
However, economic data including retail sales, business inventories and Producer Price Index (PPI) dampened investor sentiment.
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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.
