Rout in oil prices and a string of lackluster economic data affect momentum
U.S. stocks closed mostly lower on Tuesday, 15 March 2016 weighed by a rout in oil prices and a string of lackluster economic data, ahead of the Federal Reserve's important decision on interest rates. Hesitancy among investors to make big bets before the Federal Open Market Committee's delivers its outlook on the economy as well as its projection for rate increases, on top of instability in crude prices.
The Dow Jones Industrial Average rose 22.40 points, or 0.1%, to close at 17,251.53. The Nasdaq Composite shed 21.61 points, or 0.5%, to end at 4,728.67. The S&P 500 slipped 3.71 points, or 0.2%, to close at 2,015.93.
Consumer-staples, utilities, telecommunications services and tech were the only sectors to finish in positive territory.
Stocks finished the day on a mixed note as the major averages recovered from steeper opening declines. Today's trade saw equity markets moving in tandem with oil, as participants weighed a disappointing reading of the February Retail Sales report against a data heavy week that will include the latest policy decision from the Fed. Furthermore, the underperformance of the heavily-weighted health care sector kept pressure on the major indices throughout today's session. The major indices spent the bulk of today's trade moving off their early lows as investors shifted their focus to the remainder of the data heavy week, and the highly anticipated March policy statement from the Fed.
The Fed's two-day meeting is slated to conclude with a policy decision on Wednesday at 2 p.m. Eastern, followed by a news conference with Fed Chairwoman Janet Yellen. Most expect the Fed to leave monetary policy unchanged, but many economists expect at least one interest-rate increase this year. As important as the Fed's decision is its policy statement and Yellen's conference, which will offer clues about the central bank's game plan for normalizing monetary policy and its outlook for global growth.
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Among stocks under focus, Apple closed up 2% after Morgan Stanley said demand for the iPhone for the first quarter of 2016 is tracking ahead of analysts' expectations. Avon Products finished down 8.2% after announcing Monday that it would cut around 2,500 jobs and shift its corporate headquarters to the United Kingdom.
Crude oil prices settled at their lowest level in more than a week on Tuesday, 15 March 2016 as hope for a coordinated output freeze among major crude producing nations continued to fade.
April West Texas Intermediate crude dropped 84 cents, or 2.3%, to settle at $36.34 a barrel on the New York Mercantile Exchange. It saw its lowest settlement since 4 March, after losing 3.4% on Monday. May Brent crude on London's ICE Futures exchange fell 79 cents, or 2%, to $38.74 a barrel.
Traders sold off oil contracts Monday following news that Iran's oil minister said the country wouldn't participate in an output freeze with other nations, dimming hopes for such a plan, which had helped prop up prices since it was announced last month.
A monthly report from OPEC Monday showed the group's output declined by less than 200,000 barrels in February. Much of that came from pipeline disruptions in Nigeria and Iraq, some of which have already been repaired. The report also showed that output from Iran, Saudi Arabia and Kuwait rose last month.
The market will get updates on U.S. oil inventories from the American Petroleum Institute late Tuesday and the closely watched report from the Energy Information Administration will be released on Wednesday. Market expects the data to show an increase of 2.7 million barrels in crude stockpiles for the week ended 11 March, along with a decline of 3.1 million barrels for gasoline supplies and a fall of 1 million barrels for distillate stocks, which include heating oil.
Traders and investors are awaiting what is arguably the most important data point of the week and month - the U.S. Federal Reserve's Open Market Committee (FOMC) meeting that began Tuesday and ends Wednesday afternoon with a statement and press conference from Fed Chair Janet Yellen. No changes in U.S. monetary policy are expected at this meeting, but as always traders and investors will be closely parsing the FOMC statement and Yellen's comments for clues on Fed policy moves in the coming weeks or months. The marketplace believes there is about a 50-50 chance the Fed will raise interest rates in June.
There was a heavy slate of U.S. economic data due released Tuesday, including retail sales, the producer price index and manufacturing and trade inventories. However, the data had little impact on the precious metals markets.
On the U.S. economic front, sales at U.S. retailers dipped in February, and January turned out to be more disappointing than initially estimated. U.S. wholesale prices fell 0.2% in February to mark the fifth decline in seven months, largely because of lower gasoline and food prices.
But a reading of New York-area manufacturing conditions improved markedly in March, a sign that the factory sector could be stabilizing after months of weakness. And confidence among home builders held steady in March, while business inventories rose slightly.
The dollar was down sharply against the yen in the wake of the Bank of Japan decision.
Bullion prices ended lower at Comex on Tuesday, 15 March 2016 at Comex. Gold prices ended the U.S. day session solidly lower on Tuesday and closed at the lowest closing level of the month. Bearish outside markets early this weeklower crude oil prices and a firmer U.S. dollar indexare also working against the precious metals markets.
April Comex gold was last down $15.10 or 1.2% at $1,230.00 an ounce. May Comex silver was last down $0.241 or 1.7% at $15.275 an ounce.
Today's volume was once again lighter than the recent average as fewer than 809 million shares changed hands on the NYSE floor.
Tomorrow's economic data includes the weekly MBA Mortgage Index set to be released at 7:00 ET. Meanwhile, February CPI (consensus -0.2%) and Core CPI (consensus +0.1%), February Housing Starts (consensus 1137k), and February Building Permits (consensus 1204k) will be released at 8:30 ET. Separately, the February Industrial Production Report (consensus -0.3%) and Capacity Utilization (consensus 76.9%) will cross the wires at 9:15 ET. Finally, the Federal Open Market Committee's March rate decision will be announced at 14:00 ET.
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