Stock Market News For May 1, 2018
U.S. stock markets ended in negative territory on Monday as a broad-based decline pushed all three major indexes in red. Slide into the healthcare and industrial stocks more than offset gains from several merger and acquisitions (M&A) except a telecom mega deal. Moreover, strong first quarter earnings results also failed to uplift investor’s sentiment.
The Dow Jones Industrial Average (DJI) closed at 24,163.15, declining 0.6% or 148.04 points. The S&P 500 Index (INX) decreased 0.8% to close at 2,648.05. The Nasdaq Composite Index (IXIC) closed at 7,066.27, decreasing 0.8%. A total of 6.81 billion shares were traded on in the first trading day of the week, higher than the last 20-session average of 6.57 billion shares. Decliners outnumbered advancers on the NYSE by 1.74 -to-1 ratio. On the Nasdaq, decliners had an edge over advancers by 1.99 to -1 ratio. The CBOE VIX increased 3.4% and closed at 15.93.
How Did the Benchmarks Perform?
The Dow decreased 0.6% with 25 stocks of the 30-stock blue-chip index closing in the red while five traded in the green.
The S&P 500 decreased 0.8% led by 1.5% decline of the Health care Select Sector SPDR (XLV), 1.3% decrease of Industrials Select Sector SPDR (XLI) and Materials Select Sector SPDR (XLB). Each of the 11 sectors of the benchmark index ended in negative territory. The index recorded 22 new 52-week highs and 11 new 52-week lows.
The Nasdaq Composite lost 0.8%. The index recorded 55 new 52-week highs and 46 new 52-week lows.
Healthcare, Metal and Industrial Stocks Pull Down the Market
Healthcare, metal and industrials sectors were the worst performers in the last day of trading in April. These three sectors led a broad-based market decline.
Shares of Celgene Corp. (CELG - Free Report) declined 4.5% after a Morgan Stanley (MS - Free Report) report stated that the company will require one-to-three years more to resubmit its applications for the U.S. approval of the company’s critical drug ozanimod in relapsing multiple sclerosis.
Shares of Allergen plc (AGN - Free Report) plunged 5.2% after its Chairman and CEO Brent Saunders expressed his view’s that he is opposed to any changes of the company’s fundamental business structure. (Read More)
However, Allergen’s first-quarter 2018 earnings came in at $3.74 per share, beating the Zacks Consensus Estimate of $3.36. Revenues generated $3.67 billion, which marginally exceeded the Zacks Consensus Estimate of $3.59 billion.
Arconic Inc. (ARNC - Free Report) declined a massive 20.6% after reducing its 2018 outlook. The company’s adjusted earnings came in at $0.34 per share for the first quarter, which beat the Zacks Consensus Estimate of $0.32. Revenues of $3,445 million surpassed the Zacks Consensus Estimate of $3,329.6 million.
However, Arconic now expects adjusted earnings in 2018 to be in the range of $1.17-$1.27 per share (down from prior guidance of $1.45-$1.55) and free cash flow to be around $250 million (down from $500 million). (Read More)
Share price of AK Steel Holding Corp. (AKS - Free Report) declined 3.4% despite reporting strong first quarter results. Net earnings came in at $0.09 per share, beating the Zacks Consensus Estimate of $0.03. Revenues generated $1,659 million exceeding the Zacks Consensus Estimate of $1,549 million. Investors were expecting more especially after President Trump imposed 25% tariffs on imported steel.
Concern on Telecom Mega Deal Overshadows Slew of M&As
A number of M&As announcements helped markets advance in the initial hours of trading. Shares of Walmart Inc. (WMT - Free Report) increased 1.3% after the retail giant’s U.K. arm, ASDA Group Ltd., agreed to merge with British supermarket chain J Sainsbury plc. Likewise, shares of ILG Inc. (ILG - Free Report) rose 4.5% after Marriot Vacations Worldwide Corp. (VAC - Free Report) agreed to buy the former.
Also, shares of logistics company DCT Industrial Trust Inc. DCT advanced 11.6% after Prologis Inc. (PLD) agrees to buy the former. Likewise, shares of Andeavor (ANDV) advanced 13% after Marathon Petroleum Corp. (MRO) agreed to buy the former.
However, investor concerns regarding the approval of a $26.5 billion merger deal between T-Mobile US Inc. TMUS and Sprint Corp. (S - Free Report) overshadowed investor’s positive enthusiasm over these M&As.
Share price of T-Mobile US and Sprint declined 6.2% and 13.7%, respectively as many industry watchers believe that the FCC may not okay the deal. Even if the deal is permitted, it will be detrimental to consumers since number of national wireless operators will come down to three from four.
The Department of Commerce reported that personal consumption expenditure (PCE) grew $67.1 billion or 0.4% in March, the first advance since the end of 2017. Personal income increased $47.8 billion or 0.3% and personal disposable income increased $39.8 billion or 0.3% in March.
PCE price index, a key inflation barometer used by the Fed, rose to 12-month rate of 2% from 1.7% in February, hitting the central bank’s target for the first time in a year. The core PCE — excluding food and energy — increased 1.9% in March.
For the month of April, all three major stock market indexes witnessed marginal gains reversing the overall negative trend witnessed in the last two straight months. The Dow and S&P 500 each increased by 0.3%, while the Nasdaq composite gained 0.1%. Year to date, Nasdaq Composite is trading in the green while both Dow 30 and S&P 500 are in red.
Strong earnings results by most of the large U.S. corporates failed to enthuse investors. Disappointing guidance by Taiwan Semiconductor TSM, the largest contract chipmaker worldwide, led to losses for tech majors, especially Apple Inc. (AAPL - Free Report) . Moreover, Caterpillar Inc.’s (CAT - Free Report) forecast that economic growth might decelerate later this year also resulted in a broad-based market decline.
Rising bond yields also dented investors’ confidence. In April, the 10-year Treasury yield briefly hit the psychological 3% mark for the first time since January 2014.
Additionally, stock markets fluctuate due to the fear about a global trade war and geopolitical tensions related to Syria.