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Energy shares continued to decline on Wednesday, sending the Dow and the S&P 500 lower. Oil prices dropped as investors remained concerned over global glut in crude production as major oil producing countries increased crude production. Financials declined as investors digested several comments from Fed officials. Meanwhile, biotechnology stocks gained following the issuance of a draft of executive order which seeks to soften certain regulations for pharmaceutical companies.
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The Dow Jones Industrial Average (DJI) declined 0.3% to close at 21,410.03. The S&P 500 fell 0.1% to close at 2,435.61. The tech-heavy Nasdaq Composite Index advanced 0.7% to finish at 6,233.95. The Dow, the S&P 500 and Nasdaq have advanced 8.3%, 8.8% and 15.8% respectively on a year to date basis. Decliners outnumbered advancing stocks on the NYSE by a 1.70 to 1 ratio.
Energy Shares Continue To Decline
U.S. crude continued to move deeper into bear-market territory on Wednesday, posting lowest intraday level of $42.13 since August 2016. WTI crude prices declined by $0.98, or 2.3%, to close the day at $42.53 a barrel.
An increase in crude production from Libya and Nigeria heightened concern regarding an oversaturated global oil market. Crude production has gone up in Libya by close to 900,000 barrels per day (bpd), after resolving a conflict with Germany's largest crude oil and natural gas producer, Wintershall. Additionally, Nigeria has increased exports of crude oil.
Moreover, U.S. output has gone up, putting further pressure on oil prices. As per the U.S. Energy Information Administration (AMEX:EIA), crude production from U.S. has gone up to 9.35 million bpd. As per the International Energy Agency (IEA), non-OPEC output is projected to increase to 59.7 million bpd in the coming year. The IEA has also predicted US output will exceed 14.1 million bpd during the same period.
Drop in oil prices adversely affected energy shares. The broader Energy Select Sector SPDR (ETF:XLE) declined 1.6%, emerging as the worst performing sector of S&P 500. Some of its key holdings, including Exxon Mobil Corp XOM and Chevron Corp CVX fell 1.1% and 1.9% respectively. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Financials Decline
Financials declined on Wednesday as investors kept a close watch on the comments made by Fed officials. On Tuesday, Boston Fed President Eric Rosengren expressed his concerns over low interest rates by saying that low interest rates affect financial stability.
Speaking at New York University on Monday, Chicago Fed President Charles Evans raised concerns over prevailing levels of inflation and favored gradual monetary tightening. Meanwhile, New York Federal Reserve President William Dudley on Monday had expressed concern over the prevailing level of inflation. The broader Financials Select Sector SPDR (ETF:XLF) declined 0.8%.
Healthcare Shares Boost Nasdaq
President Donald Trump is preparing to issue an executive order to soften certain regulatory hurdles that will be helpful for pharmaceutical companies. The proposals include collaboration between drugmakers and insurers, and also to come up with mechanisms that will make other countries spend more on drugs.
As a result, the broader Health Care Select Sector SPDR (ETF:XLV) advanced 1.3% which ultimately had a positive impact on broader markets. Some of its key holdings, including Pfizer Inc. PFE and UnitedHealth Group Inc. UNH advanced 1% and 0.9% respectively.
Economic Data
Existing-home sales increased by 1.1% to a seasonally adjusted annual rate of 5.62 million in May from a revised figure of 5.56 million in the previous month. The figure came in well ahead of consensus estimate of 5.54 million.
Stocks that made Headlines
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.