The major indices hover above their worst levels of the day after an aggressive selloff through the first half. Today's session has marked a new 52-week low in the benchmark index as it has surrendered more than 52 points this session. The averages have slipped as oil concerns and poor economic data weigh on the beleaguered stock market. The Nasdaq (-3.5%) trails the S&P 500 (-3.0%) and the Dow Jones Industrial Average (-2.8%).
Overnight, WTI crude was pressured by news that the International Atomic Energy Agency may announce that Iran is in compliance with an agreement to restrict the country's nuclear program. This move is expected to help lift sanctions against the country and to lead to the re-establishment of oil trade. In response to this, WTI crude surrendered the $31.00/bbl price level overnight. This helped weigh on international indices heading into the open. Currently the energy-component is down 5.9% at $29.37/bbl.
Futures extended their losses when a slew of poor economic data was released this morning. Specifically of note, the Empire Manufacturing report fell to -19.4 in January (Briefing. com consensus -3.5) and the U.S. Retail Sales report for December showed a decline of 0.1% (Briefing.com consensus +0.1%).
On the leaderboard, financials (-4.2%), energy (-4.2%), technology (-3.6%), and materials (-2.8%) post the steepest losses. Meanwhile, in front of the pack, countercylical utilities (-1.8%), telecom services (-1.8%), consumer staples (-2.1%), and health care (-2.2%) outperform.
Looking in the financial sector, large-caps Wells Fargo (WFC 48.57, -2.07) and Citigroup (C 42.41, -2.96) underperform after both companies announced Q4 earnings this morning. Wells Fargo showed earnings and revenue in-line with consensus. Meanwhile, Citigroup reported in-line EPS with a revenue beat. The two stocks trade lower by 4.1% and 6.5%, respectively. Citigroup is likely suffering because it announced a $549 million loan loss reserve build mirroring JPMorgan Chase's (JPM 56.52, -1.67) news after their Q4 results yesterday. Both Citigroup and JPMorgan Chase have increased their loan loss reserves due to positions in their energy portfolios.
In the heavily-weighted technology space, high-beta chipmakers show relative weakness, evidenced by the 5.2% decline in the PHLX Semiconductor Index. The sub-group is showing relative weakness after constituent Intel (INTC 29.88, -2.86) reported earnings this morning. Despite reporting a beat, the stock is down 8.7%, likely due to a $200 million decline in operating income. Meanwhile, large-cap constituents Facebook (FB 94.66, -3.67), Microsoft (MSFT 50.87, -2.23), and Apple (AAPL 96.62, -2.90) have kept pace with the retreat, declining between 2.2% and 3.5%, apiece.
Heavy selling pressure in equities has pushed Treasuries to their highs. The benchmark note yield is lower by six basis points at 2.03%.
Economic data released today included December PPI, December Retail, January Empire Manufacturing Index, December Industrial Production report, November Business Inventories, and the preliminary reading of the Michigan Sentiment Index for January.
- The Producer Price Index report for December produced a 0.2% decline
- The downtick in the final demand index was due to a 0.7% decline in prices for final demand goods.
- The index for final demand services ticked up 0.1%.
- On a year-over-year basis, the index for final demand is down 1.0%, which is the eleventh consecutive 12-month decline.
- Core PPI is up 0.3%. core PPI, which excludes food and energy, increased 0.1%.
- December Retail Sales report decreased 0.1% (consensus +0.1%) while sales ex-auto also decreased 0.1% (consensus 0.3%).
- Total sales for 2015 were up 2.1% from 2014 while Q4 sales rose 1.8% year-over-year.
- Empire Manufacturing Survey for January registered a reading of -19.4, which was below the prior month's revised reading of -6.2 (from -4.6) (consensus -3.5)
- Industrial production declined 0.4% in December with a revised 0.9% decline (from -0.6%) in November. (consensus -0.2%)
- That was the fifth consecutive monthly decline
- Total industrial production in December was down 1.8% below the December 2014 level.
- Total industry capacity utilization dipped to 76.5% (consensus 76.9%) from a revised 76.9% (from 77.0%) in November.
- Rates were down for all major industry groups, led by utilities, which fell to 73.2% from 74.8%.
- Total business inventories were down 0.2% in November following a downwardly revised 0.1% decrease (from 0.0%) in October. (consensus unchanged)
- Retailer inventories increased 0.2% in November on top of a 0.1% increase in October.
- The inventory-to-sales ratio was unchanged at 1.38; this is up from the same period a year ago when the ratio stood at 1.32.
- The preliminary reading for the University of Michigan Index of Consumer Sentiment for January was 93.3 (consensus, which was at 92.6.)
- This was up from the final December reading of 92.6
- The improvement stemmed from a better Consumer Expectations component, which increased to 85.7 from 82.7.
- The increase in expectations outweighed a drop in the Current Economic Conditions Index, which decreased to 105.1 from 108.1.
Closing Market Summary: Stock Market Led Lower by Energy and Financials