Tuesday, June 20, 2017

Slumping Oil Prices Rein in Stock Indexes

NEW YORK — The price of oil slumped to its lowest level of the year on Tuesday and helped to restrain U.S. stock indexes, which set records a day earlier.
KEEPING SCORE: The Standard & Poor's 500 index dipped 12 points, or 0.5 percent, to 2,440 as of 3:38 p.m. Eastern time. The Dow Jones industrial average lost 42 points, or 0.2 percent, to 21,486. Both the S&P 500 and Dow set records on Monday thanks to big gains from technology stocks.
The Nasdaq composite lost 41 points, or 0.7 percent, to 6,197, and the Russell 2000 index of small-cap stocks fell 14, or 1 percent, to 1,403.
SLIDING LOWER: The price of benchmark U.S. crude fell $97 cents, or 2.2 percent, to settle at $43.23 per barrel. Earlier in the day, it touched its weakest level since mid-November.
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The price of oil has been bouncing between $40 and $55 per barrel for much of the last year, down from a peak of more than $110 in the summer of 2013. Drillers have gotten much more efficient at pulling oil out of the ground, which has helped supplies balloon and weigh on prices. Oil-producing countries have banded together to cut production in hopes of limiting supplies, but analysts are skeptical about how much they can influence prices.
Brent crude, the international standard, fell 89 cents, or 1.9 percent, to close at $46.02 per barrel.
THE STOCK EFFECT: The sliding price of oil helped yank energy stocks in the S&P 500 down by 1.3 percent, the largest loss among the 11 sectors that make up the index.
Transocean fell 37 cents, or 4.3 percent, to $8.19, Hess dropped $1.43, or 3.3 percent, to $41.53 and Marathon Oil lost $1.25, or 3 percent, to $40.55.
IMPACT ON EARNINGS: A resurgence in profit growth has been one of the big reasons that stocks have marched to records in recent months, and analysts had been forecasting energy companies to be a big contributor to growth this year. Falling oil prices put could put those profit expectations at risk.
John Manley, chief equity strategist at Wells Fargo Funds Management, is still optimistic that earnings expectations can keep rising. Lower oil prices will undercut profits for energy stocks, but they should help other industries that will be paying lower fuel bills. And as long as profits continue to rise, Manley says stocks can too.
"Earnings are starting to re-accelerate," he said. "It may stop tomorrow, and if it does, well, I'll change my mind tomorrow. But right now, earnings are growing."
BUILDING HIGHER: Homebuilder Lennar rose $1.04, or 2 percent, to $53.78 after reporting stronger revenue and earnings for the latest quarter than analysts expected.
BUYOUT BUMP: Parexel International, a biopharmaceutical services provider, jumped after it said it will go private following a buyout by Pamplona Capital Management. The investment firm agreed to pay $88.10 per share in cash for the company.
Parexel jumped $3.28, or 3.9 percent, to $87.20.
SOURED: Chipotle Mexican Grill slumped $31.91, or 7 percent, to $427.00 after some analysts cut their profit estimates for the restaurant chain. Chipotle said marketing costs will eat up a slightly bigger percentage of revenue this quarter than in the first three months of the year.
YIELDS: The yield on the 10-year Treasury note fell to 2.16 percent from 2.19 percent late Monday. The two-year yield held steady at 1.36 percent, and the 30-year yield fell to 2.75 percent from 2.79 percent.
CURRENCIES: The British pound fell to $1.2622 from $1.2729 after Bank of England Governor Mark Carney cooled market expectations that the bank may soon raise interest rates.
The euro dipped to $1.1126 from $1.1147, and the dollar slipped to 111.48 Japanese yen from 111.54 yen.
COMMODITIES: Gold slipped $3.20 to settle at $1,243.50 per ounce, silver lost 9 cents to $16.42 per ounce and copper dropped 4 cents to $2.55 per pound.
Natural gas rose a penny to settle at $2.91 per 1,000 cubic feet, heating oil fell 2 cents to $1.40 per gallon and wholesale gasoline lost 3 cents to $1.42 per gallon.
MARKETS OVERSESAS: The French CAC 40 slipped 0.3 percent, the German DAX lost 0.6 percent and the FTSE 100 fell 0.7 percent.
The Japanese Nikkei 225 rose 0.8 percent, the Hang Seng in Hong Kong fell 0.3 percent and South Korea's Kospi dipped 0.1 percent.
NYT

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