Oil price drop stalls stocks on Wall Street

Dow rises but the broader market falls after moving between small gains and losses.
GW&K Investment Management portfolio manager Aaron Clark says strong results are already priced into stocks.

Blue-chip stocks on Wall Street rose but the broader market fell after moving between small gains and losses throughout the session.

Energy shares fell alongside a decline in oil prices while financials rose on strong earnings reports.

The earnings season gets into full swing this week, with 60 companies in the S&P 500 due to report.

Before the market opened, Bank of America reported second-quarter earnings that beat expectations, sending the shares up 3.8%.

The results helped buoy financial stocks, which rose 1.6% in the S&P 500.

BlackRock also reported higher-than-expected earnings but its shares fell 1.6% as the money manager pulled in significantly less investor cash than a year earlier.

Oil prices drop 4%
Energy stocks fell 1.4% on oil prices that fell more than 4% for the second time in the past four sessions as supply fears eased.

US crude dropped 4.2% to $US68.06 a barrel while Brent crude, the global benchmark, was down 4.6% at $US71.84.

On Wall Street, the Dow Jones Industrial Average rose 44.95 points, or 0.2%, to 25,064.36. The S&P 500 fell 0.1% to 2798.43 and the Nasdaq Composite dropped 0.3% to 7805.72.

GW&K Investment Management portfolio manager Aaron Clark says earnings growth is either peaking or has already peaked and strong results are largely priced into stocks.

“The latest reports alone won’t push the market to new highs,” he says.

US bond yields rise
US government bond prices slipped after strong data on retail sales.

The yield on the benchmark 10-year Treasury note rose to 2.875% from 2.831% on Friday. The two-year yield rose to 2.611% from 2.582%. 

Yields jumped after a Commerce Department report showed retail sales rose 0.5% in June and that the increase in May had been revised to 1.3% from 0.8%.

The data capped a strong second quarter for retail sales, which were up 1.9% from the first three months of 2018 and 5.9% from the second quarter of 2017.

In Europe, the Stoxx 600 fell 0.3%. Banks outperformed in Europe as shares in Deutsche Bank added7.3% after its preliminary second-quarter results beat expectations.

France’s CAC 40 fell 0.4%, Germany’s DAX rose 0.2% and the UK’s FTSE 100 fell 0.8%.

Trade tensions knock Asian stocks
Meanwhile, Asian stocks have been hit harder by the trade disputes, with major indexes down so far this year.

Shanghai stocks have shed nearly 15%, and economists estimate trade conflicts could cut 0.2 to 0.5 percentage point off China’s gross domestic product in the coming year.

GDP data released yesterday revealed a slowing Chinese economy in the second quarter, weighed down by government initiatives to rein in risky borrowing and lending.

Growth edged down to 6.7% from a year ago, compared with 6.8% in the first quarter. The figures remain above the government’s 6.5% target.

The Shanghai Composite Index fell 0.6%, Hong Kong’s Hang Seng was flat and South Korea’s Kospi dropped 0.4%. The Tokyo market was closed for a holiday.

All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.

Login in or Register to view & post comments