Benchmarks started the week on a dismal note after a slump in oil prices and disappointing overseas economic data dented investor sentiment. Energy shares were hit hard after oil prices plunged to a five-year low over continued concerns of oversupply. Moreover, discouraging China's trade numbers, contraction of Japan's economy and less-than-expected expansion in Germany's industrial output has raised concerns of a slowdown in global economy.
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 0.6% to close at 17,852.48, registering its biggest one-day percentage loss in six-weeks. The Standard & Poor 500 (S&P 500) decreased 0.7% to close at 2,060.31. The tech-laden Nasdaq Composite Index closed at 4,740.69; losing 0.8%. The fear-gauge CBOE Volatility Index (VIX) surged 20.2% to settle at 14.21. Total volume on the New York Stock Exchange was 3.8 billion. Decliners outpaced advancing stocks on the NYSE. For 68% stocks that declined, 29% advanced.
Oil prices took a beating on Monday. The West Texas Intermediate (WTI) crude oil price dropped 4.4% to settle at $63.05 per barrel, its lowest level since Jul 2009. Additionally, price of Brent crude oil also slipped 4.4% to settle at $66.19 per barrel. Brent crude oil prices dropped to its lowest level in five years and registered its third-largest one-day percentage decline this year. Oil prices tumbled on forecasts that oversupply will persist in the first half of 2015. Moreover, Friday's upbeat jobs report strengthened the dollar and had dragged oil prices down.
Energy shares were hit hard due to slump in oil prices. The Energy Select Sector SPDR (XLE) plummeted 4.1%. The sector was the biggest loser among the S&P 500 sectors. Shares of key energy stocks including Exxon Mobil Corporation (XOM), Chevron Corporation (CVX), Schlumberger Limited (SLB), ConocoPhillips (COP) and EOG Resources, Inc. (EOG) decreased 2.3%, 3.7%, 3.4%, 4.2% and 2.8%, respectively.
Other energy shares including Continental Resources, Inc. (CLR) and Goodrich Petroleum Corp. (GDP) tanked 11.7% and 20.2%, respectively. Small-cap energy stocks suffered most of the damage due to the selloff in crude oil. The PowerShares S&P SmallCap Energy ETF sank 7.6% on Monday.
Other commodities such as copper and iron ore also declined, dragging material shares down. The Materials Select Sector SPDR (XLB) was the second biggest loser among the S&P 500 sectors. The sector declined 1.6%. Key materials stocks including E. I. du Pont de Nemours and Company (DD), The Dow Chemical Company (DOW), Nucor Corporation (NUE), Monsanto Company (MON) and FMC Corp. (FMC) decreased 0.5%, 3.6%, 0.8%, 0.7% and 1.3%, respectively. Overall, 7 out of 10 sectors of the S&P 500 ended in the red.
Meanwhile, discouraging economic reports from China, Japan and Germany had a negative impact on investor sentiment. China's imports dropped 6.7% in November from the year-ago period, in contrast to analysts forecasting a 3.9% increase. China's import had risen 4.6% in the previous month. On the other hand, exports increased 4.7% in November. However, the rise in exports was much less than October's rise of 11.6%.
Separately, Japan's economy contracted in the third quarter of 2014 by more than previously forecasted. The world's third largest economy shrank 1.9% from July to September, more than the preliminary estimate of 1.6%. Drop in business spending was cited to be the reason behind this contraction.
Additionally, German industrial output increased at a slower pace than expected. According to the Ministry of Economy, industrial output in Germany expanded 0.2% in October, less than analysts' expectation of a rise by 0.3%. Previous months' data was also revised lower to growth of 1.1% from 1.4%.
Coming to domestic front, shares of McDonald's Corp. (MCD) declined the most among the Dow components. Shares of McDonald's dropped 3.8% after the company reported its global comparable store sales decreased 2.2% in November. The drop in global sales was more than analysts' expectations of a decrease by 1.7%. At its U.S. segment, sales fell 4.6% in November, more than analysts' expectation of a fall by 1.9%. This drop of 4.6% topped September's decline of 4.1% which was then the highest monthly drop since early 2003.
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 0.6% to close at 17,852.48, registering its biggest one-day percentage loss in six-weeks. The Standard & Poor 500 (S&P 500) decreased 0.7% to close at 2,060.31. The tech-laden Nasdaq Composite Index closed at 4,740.69; losing 0.8%. The fear-gauge CBOE Volatility Index (VIX) surged 20.2% to settle at 14.21. Total volume on the New York Stock Exchange was 3.8 billion. Decliners outpaced advancing stocks on the NYSE. For 68% stocks that declined, 29% advanced.
Oil prices took a beating on Monday. The West Texas Intermediate (WTI) crude oil price dropped 4.4% to settle at $63.05 per barrel, its lowest level since Jul 2009. Additionally, price of Brent crude oil also slipped 4.4% to settle at $66.19 per barrel. Brent crude oil prices dropped to its lowest level in five years and registered its third-largest one-day percentage decline this year. Oil prices tumbled on forecasts that oversupply will persist in the first half of 2015. Moreover, Friday's upbeat jobs report strengthened the dollar and had dragged oil prices down.
Energy shares were hit hard due to slump in oil prices. The Energy Select Sector SPDR (XLE) plummeted 4.1%. The sector was the biggest loser among the S&P 500 sectors. Shares of key energy stocks including Exxon Mobil Corporation (XOM), Chevron Corporation (CVX), Schlumberger Limited (SLB), ConocoPhillips (COP) and EOG Resources, Inc. (EOG) decreased 2.3%, 3.7%, 3.4%, 4.2% and 2.8%, respectively.
Other energy shares including Continental Resources, Inc. (CLR) and Goodrich Petroleum Corp. (GDP) tanked 11.7% and 20.2%, respectively. Small-cap energy stocks suffered most of the damage due to the selloff in crude oil. The PowerShares S&P SmallCap Energy ETF sank 7.6% on Monday.
Other commodities such as copper and iron ore also declined, dragging material shares down. The Materials Select Sector SPDR (XLB) was the second biggest loser among the S&P 500 sectors. The sector declined 1.6%. Key materials stocks including E. I. du Pont de Nemours and Company (DD), The Dow Chemical Company (DOW), Nucor Corporation (NUE), Monsanto Company (MON) and FMC Corp. (FMC) decreased 0.5%, 3.6%, 0.8%, 0.7% and 1.3%, respectively. Overall, 7 out of 10 sectors of the S&P 500 ended in the red.
Meanwhile, discouraging economic reports from China, Japan and Germany had a negative impact on investor sentiment. China's imports dropped 6.7% in November from the year-ago period, in contrast to analysts forecasting a 3.9% increase. China's import had risen 4.6% in the previous month. On the other hand, exports increased 4.7% in November. However, the rise in exports was much less than October's rise of 11.6%.
Separately, Japan's economy contracted in the third quarter of 2014 by more than previously forecasted. The world's third largest economy shrank 1.9% from July to September, more than the preliminary estimate of 1.6%. Drop in business spending was cited to be the reason behind this contraction.
Additionally, German industrial output increased at a slower pace than expected. According to the Ministry of Economy, industrial output in Germany expanded 0.2% in October, less than analysts' expectation of a rise by 0.3%. Previous months' data was also revised lower to growth of 1.1% from 1.4%.
Coming to domestic front, shares of McDonald's Corp. (MCD) declined the most among the Dow components. Shares of McDonald's dropped 3.8% after the company reported its global comparable store sales decreased 2.2% in November. The drop in global sales was more than analysts' expectations of a decrease by 1.7%. At its U.S. segment, sales fell 4.6% in November, more than analysts' expectation of a fall by 1.9%. This drop of 4.6% topped September's decline of 4.1% which was then the highest monthly drop since early 2003.
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CHEVRON CORP (CVX): Free Stock Analysis Report
SCHLUMBERGER LT (SLB): Free Stock Analysis Report
CONOCOPHILLIPS (COP): Free Stock Analysis Report
EOG RES INC (EOG): Free Stock Analysis Report
CONTL RESOURCES (CLR): Free Stock Analysis Report
GOODRICH PETROL (GDP): Free Stock Analysis Report
DU PONT (EI) DE (DD): Free Stock Analysis Report
DOW CHEMICAL (DOW): Free Stock Analysis Report
NUCOR CORP (NUE): Free Stock Analysis Report
MONSANTO CO-NEW (MON): Free Stock Analysis Report
FMC CORP (FMC): Free Stock Analysis Report
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