Stocks dip as oil prices and energy companies fall sharply
New York – Energy companies and oil prices took their worst losses in months Friday on reports OPEC countries plan to produce more oil soon. Stock indexes finished an indecisive week with small losses.
U.S. crude oil sank 4 per cent after multiple reports indicated that Russia and OPEC could start producing more oil soon. They cut production at the start of 2017 following a big buildup in supplies that had pushed prices lower.
In November they extended that cut through the end of 2018, but according to reports this week, they might agree to start raising production in June. U.S. crude finished at a three-year high Monday and has fallen 6 per cent since then.
The drop in the price of oil has meant sharp losses for energy companies, but it gave airlines a boost as investors anticipated lower fuel costs. Bond yields declined again, which hurt banks but helped dividend-payers like household goods makers.
Wall Street also focused on quarterly results from retailers. Gap plunged after it said its namesake brand is still struggling, but Foot Locker soared after it said sales of premium shoes improved.
Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, said energy companies and oil prices had made big gains lately and were due to slow down. He said the growing global economy is going to help the industry in the longer term.
“If you look at the sectors that are outperforming, it’s those that tend to be pro-growth,” he said, especially technology and consumer-focused companies. Over the last month that growth, and the strong company profits that come with it, have not translated into gains for stocks. Sandven said that could change when companies start reporting their second-quarter results in July.
The S&P 500 index slid 6.43 points, or 0.2 per cent, to 2,721.33. The Dow Jones industrial average fell 58.67 points, or 0.2 per cent, to 24,753.09. The Nasdaq composite climbed 9.42 points, or 0.1 per cent, to 7,433.85 as consumer-focused companies moved higher. The Russell 2000 index of smaller-company stocks lost 1.29 points, or 0.1 per cent, to 1,626.93.
U.S. markets will be closed Monday for the Memorial Day holiday.
U.S. crude dropped to $67.88 a barrel in New York. Brent crude, used to price international oils, fell 3 per cent to $76.44 a barrel in London. Increased oil production and lower prices could reduce profits for energy companies. Exxon Mobil fell 1.9 per cent to $78.71 and Chevron gave up 3.5 per cent to $122.19.
Among airlines, Delta gained 2.7 per cent to $55.87 and American rose 3.1 per cent to $44.91. The stocks have skidded over the last few months as the rising price of oil increased their fuel costs and cut into their profits. Delta stock is flat in 2018 and American Airlines has fallen 14 per cent.
Bond prices kept rising. The yield on the 10-year Treasury note fell to 2.93 per cent form 2.98 per cent.
The falling yields helped household goods makers break out of their recent struggles. Toothpaste maker Colgate-Palmolive added 2 per cent to $63.75 and cereal maker Kellogg rose 2.7 per cent to $65.23. The stocks, and others that pay large dividends, have lagged behind the rest of the market as investors found technology firms and consumer-focused companies more attractive thanks to signs of strong growth in the U.S. economy.
Gap dropped 14.6 per cent to $28.15 following a drop in sales for Gap brand stores. Gap has been shifting focus away from the namesake brand because it’s not connecting with shoppers and has struggled to separate itself from rivals. Its Old Navy and Banana Republic brands fared better. Elsewhere, discount retailer Ross Stores gave up 6.8 per cent to $77.34 after it gave disappointing forecasts for the current quarter and the full year.
Foot Locker blew past estimates and said sales of premium shoes continue to improve, which has been a major concern for it and other sporting goods companies. The stock jumped 20.2 per cent to $54.74. Shoe Carnival leaped 20.7 per cent to $31.80 after it beat expectation in the first quarter. It, too, said athletic shoe sales improved.
Fiat Chrysler fell 2 per cent to $21.82 after saying it’s recalling 4.8 million vehicles in the U.S. because in rare circumstances drivers may not be able to turn off the cruise control. The company warned owners not to use cruise control until the vehicles can be fixed with a software update. Drivers can still stop the cars using the brakes.
Wholesale gasoline slid 2.3 per cent to $2.18 a gallon. Heating oil lost 2.5 per cent to $2.21 a gallon. Natural gas remained at $2.94 per 1,000 cubic feet.
Gold slipped 0.1 per cent to $1,303.70 an ounce. Silver lost 0.8 per cent to $16.55 an ounce. Copper fell 0.6 per cent to $3.08 a pound.
The dollar rose to 109.37 yen from 109.28 yen. The euro fell to $1.1669 from $1.1727.
Germany’s DAX rose 0.6 per cent and the CAC 40 in France fell 0.1 per cent. Britain’s FTSE 100 rose 0.2 per cent. Japan’s benchmark Nikkei 225 index rose 0.1 per cent and South Korea’s Kospi lost 0.2 per cent. Hong Kong’s Hang Seng shed 0.6 per cent.
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