Benchmarks closed in the red on Friday following dismal earnings results, which had a negative impact on biotech stocks. Also, continued decline in shares of tech giants weighed on the tech sector. While the Dow registered its highest weekly decline since Feb 12, the S&P 500 and the Nasdaq posted the same since Feb 5. Meanwhile, the Nasdaq posted its worst monthly performance since January. However, the Dow notched its first three month winning stretch since January 2014 and the S&P 500 gained for second straight month for the first time this year.
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The Dow Jones Industrial Average (DJI) decreased 0.3%, to close at 17,773.64. The S&P 500 fell 0.5% to close at 2,065.30. The tech-laden Nasdaq Composite Index closed at 4,775.36, losing 0.6%. The fear-gauge CBOE Volatility Index (VIX) increased 3.2% to settle at 15.70. A total of around 9 billion shares were traded on Friday, higher than the last 20-session average of 7 billion shares. Decliners outpaced advancing stocks on the NYSE. For 55% stocks that declined, 41% advanced.
Shares of Gilead Sciences, Inc. ( GILD ) fell 9.1% after reporting first quarter earnings per share (EPS) of $2.98, missing the Zacks Consensus Estimate of $3.03. Also, total revenues of $7.79 billion were well below the Zacks Consensus Estimate of $8.13 billion. Moreover, Gilead’s blockbuster hepatitis C virus (HCV) drug, Harvoni, plunged 15.7% year over year to $3 billion in the reported quarter.
Decline in Gilead Sciences’ shares had a negative impact on biotech sector, which in turn had an adverse impact on the broader healthcare sector. The iShares Nasdaq Biotechnology Index (IBB) dropped 2.6%, while the Health Care Select Sector SPDR (XLV) decreased 1.6%, becoming the biggest decliner among the S&P 500 sectors. Key stocks from the healthcare sector including Eli Lilly and Company ( LLY ), Amgen Inc. ( AMGN ), Allergan plc ( AGN ) and Celgene Corporation ( CELG ) decreased 1.2%, 1.4%, 1.1% and 4.3%, respectively. Dow components Johnson & Johnson ( JNJ ), Pfizer Inc. ( PFE ) and Merck & Co. Inc. ( MRK ) fell 0.4%, 0.6% and 1.6%, respectively.
Moreover, lower-than-expected earnings results from tech giants continued to weigh on tech sector. The Technology Select Sector SPDR (XLK) fell 0.9% and was one of the biggest decliner among the S&P 500 sectors. Some of its major components including International Business Machines Corporation ( IBM ), Apple Inc. ( AAPL ), Visa Inc. ( V ), Intel Corporation ( INTC ), Alphabet Inc. ( GOOGL ) and Broadcom Limited ( AVGO ) decreased 0.8%, 1.2%, 0.6%, 3.6% and 1.6%, respectively.
In economic news, the U.S. Department of Commerce reported that personal consumption expenditure price index (PCE) rose 0.1% in March, lower than February’s increase of 0.2%. Core PCE increased 0.1%, in line with the consensus estimate. However, this was lower than February’s increase of 0.2%.
The U.S. Department of Commerce further reported that personal income increased by 0.4% or $57.4 billion and disposable personal income (DPI) also advanced 0.4% or $50.4 billion in March. However, personal spending increased only 0.1% in March, identical to February’s increase and was less than the consensus estimate of 0.2% rise.
Further, final reading of consumer sentiment index released by University of Michigan came in at 89 in March, compared to the consensus estimate of 90.1 and February’s reading of 89.7.
Despite beating its first quarter revenue estimates, shares of Chevron Corporation ( CVX ) fell 0.2% after loss per share came in at 39 cents, wider than the Zacks Consensus Estimate for a loss of 18 cents. Revenues of $23,553 million were just above the Zacks Consensus Estimate of $23,547 million.
However, shares of Amazon.com, Inc. ( AMZN ) increased 9.6% after first-quarter EPS of $1.07 beat the Zacks Consensus Estimate of $0.61. Amazon reported revenue of $29.13 billion, also outpaced the Zacks Consensus Estimate of $27.94 billion. Exxon Mobil Corporation ( XOM ) rose 0.4% after first quarter EPS and revenues of 43 cents and $48,707 million beat the Zacks Consensus Estimate of 31 cents and $48,137 million, respectively.
Additionally, Monster Beverage Corporation’s ( MNST ) shares jumped 12.8% after announcing first quarter adjusted EPS of 80 cents, beating the Zacks Consensus Estimate of 75 cents. Net sales of $680.2 million also came higher than the Zacks Consensus Estimate of $660 million. It was the biggest gainer among the S&P 500 companies.
For the week, the Dow, the S&P 500 and the Nasdaq declined, 1.3%, 1.3% and 2.7%, respectively, following losses in tech and healthcare stocks. Apple’s lackluster quarterly performance and mixed first quarter earnings results weighed on key U.S. indexes. However, gain in oil prices had a positive impact on investor sentiment.
Apple’s shares declined following weaker-than-expected fiscal second quarter earnings results primarily because of a year-on-year drop in iPhone sales. Also, activist investor Carl Icahn sold his entire stake in Apple following the company’s inability to boost sales.
Oil prices increased during the week following weaker dollar and fall in gasoline inventories. Fed’s decision to keep rates unchanged and Bank of Japan’s decision to not to come up with new stimulus measures to control the yen weakened the dollar.
On earnings front, E. I. du Pont de Nemours and Company’s ( DD ), Facebook, Inc. ( FB ), Comcast Corporation ( CMCSA ) and The Boeing Company ( BA ) posted better-than-expected earnings results. Meanwhile, Xerox Corporation ( XRX ), 3M Company ( MMM ) and Twitter, Inc. ( TWTR ) posted disappointing earnings results.
In economic news, fall in new home sales, Consumer Confidence Index, lower-than-expected rise in durable orders and slower-than-expected rise in first quarter GDP estimate dragged benchmarks lower.
However, increase in the S&P/Case-Shiller Home Price Index (Composite 20), Pending Home Sales Index and decline in total mortgage application volume boosted investor sentiment.
For the month, the S&P 500 and the Dow advanced 0.5% and 0.3%, respectively, while the Nasdaq declined 1.9%. Energy stocks were the biggest gainer during the month, while tech stocks were biggest laggards. Meanwhile, mixed first quarter earnings results also had a negative impact on markets.
Oil prices posted monthly gains due to weaker dollar, fall in U.S rig counts, rise in gasoline consumption and worldwide outages with the WTI crude rising by 24.8% in April.
However, decline in Apple’s, Microsoft’s, Intel’s, Netflix, Inc’s ( NFLX ) and IBM’s shares following disappointing earnings results dragged tech stocks downward for the month.
Further, the minutes on Federal Reserve’s March two-day policy meeting indicated that the Fed officials shared diverse views regarding rate hike chances which also raised concerns over rate hike course.
According to the Fed’s Beige Book, economic activity improved in most districts of the U.S. Encouraging economic news including, rise in ISM Services Index, Consumer Price Index (CPI) and Core CPI and decline in initial claims boosted benchmarks for the month. However, decline in new orders, retail sales, building permits and Producer Price Index (PPI) dampened investor sentiment.
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