By Anora Mahmudova and Victor Reklaitis, MarketWatch
Shares of Exxon Mobil, Chevron slump after earnings misses
Drops in earnings for energy giants Exxon Mobil and Chevron
prompted investors to dump energy stocks in droves Friday, which
eventually weighed on all main equity benchmarks.
The S&P 500 closed 4.71 points, or 0.2%, lower at 2,103.90,
with the energy sector accounting for most of the losses. The
sector fell 2.6% and is now down nearly 28% over the past 12
months.
The benchmark index ended July roughly at the same level it
finished in May, erasing all of the previous month's losses. The
weekly gain for the benchmark stood at 1.2%, while it booked a 2%
gain over the month.
The Dow Jones Industrial Average slipped 55.32 points, or 0.3%,
to 17,690.66, but ended the week with a gains of 0.7% and booked a
0.4% gain over the month. The Nasdaq Composite ended the session
less than a point lower at 5,218.28. The tech-heavy index rose 0.8%
over the week and 2.9% over the month.
Investors also were debating whether data showing weak wage
growth could prompt the Federal Reserve to think twice about
raising interest rates in September. Analysts pointed out that weak
wage growth is a symptom of slowing economic growth.
"While weak data suggest the Fed might be patient with rate
hikes, the other side of this story is that the economy is not
growing as fast as we would hope," said Quincy Krosby, market
strategist at Prudential Financial.
"For prices to go higher, the economy needs to accelerate, while
earnings growth needs to pick up," Krosby said.
Another focus of investors is second-quarter earnings. Reports
so far this season have on the whole beaten estimates, but revenue
and earnings growth have nonetheless been weak.
"The last data I saw from FactSet showed that 75% of S&P 500
companies that have reported have topped estimates, better than the
63% historical average, but earnings for the first half of the year
are still on pace to actually contract by 0.7%, which would be the
first year-over-year decline in the first half of a year since
2009," wrote Andrew Adams, chief market technician at Raymond
James.
"As a result, we have not seen the market pop [as] typically
expected whenever such a large percentage of companies is topping
estimates, and with stocks peaking the past two days at the 2110
level, it appears that level is the first hurdle to overcome before
the prior high can be threatened," Adams wrote.
Economic reports: The wages and benefits that companies,
governments and nonprofit institutions pay their employees rose a
record-low 0.2% in the second quarter, according to the employment
cost index released by the Labor Department on Friday. That was
well below the 0.7% gain in the first quarter and came as a
surprise to economists surveyed by MarketWatch, who had expected a
0.6% gain.
"Wage costs data are very important for the Federal Reserve, as
they would really like to see inflation to start going higher. But
deceleration in wage growth suggests otherwise. At this point,
nobody is sure what to do about the rates, neither the Fed nor the
market," Krosby said.
Separately, Chicago PMI rose in July to the highest level since
January, suggesting a pickup in business during the summer.
Read:Sharp deceleration in employment costs gives Fed a reason
to delay rate hike
(http://www.marketwatch.com/story/sharp-deceleration-in-employment-costs-gives-fed-a-reason-to-delay-rate-hike-2015-07-31)
Movers & Shakers: Exxon Mobil Corp. (XOM) shares dropped
4.6% after the biggest U.S. oil company reported a 52% drop in
profit for its second quarter
(http://www.marketwatch.com/story/exxon-mobil-earnings-halved-by-lower-oil-price-2015-07-31),
as higher profit from its refining and chemical operations couldn't
offset plunging earnings in its exploration and production business
amid lower crude prices.
Chevron Corp. (CVX) slumped 4.9% after the oil giant reported a
sharp decline in second-quarter profit and sales
(http://www.marketwatch.com/story/chevrons-profit-plunges-on-low-oil-price-2015-07-31),
hurt by lower crude prices and one-time charges.
A slump in crude prices
(http://www.marketwatch.com/storyno-meta-for-guid) also weighed on
the sector, with oil futures closing at a four-month low after data
showed a rise in the number of U.S. oil rigs.
Coca-Cola Enterprises Inc. (CCE) jumped 12% following news it is
in merger talks with other Coke bottlers
(http://www.marketwatch.com/story/coca-cola-enterprises-in-advanced-talks-over-tie-up-with-other-coke-bottlers-2015-07-31).
Expedia Inc. (EXPE) was another big S&P advancer, surging
13% after its quarterly earnings topped forecasts
(http://www.marketwatch.com/story/expedia-profit-tops-expectations-2015-07-30-174852319)
late Thursday.
Royal Caribbean Cruises Ltd.(RCL) surged 8.6% after raising its
earnings outlook for the year
(http://www.marketwatch.com/story/royal-caribbean-boosts-outlook-as-profit-beats-2015-07-31).
Hanesbrands Inc. (HBI) fell 9.1% after quarterly revenue missed
estimates
(http://www.wsj.com/articles/hanesbrands-misses-estimates-on-revenue-1438294406).
Read more in the Movers & Shakers column
(http://www.marketwatch.com/story/exxon-mobil-chevron-royal-caribbean-earnings-in-focus-2015-07-30)
Other markets: Chinese stocks closed lower and notched their
biggest monthly drop in nearly six years
(http://www.marketwatch.com/story/china-shares-headed-for-worst-month-in-over-two-years-2015-07-31),
while European equities seesawed but were poised for weekly and
monthly gains
(http://www.marketwatch.com/story/european-stocks-nudge-higher-ahead-of-inflation-data-2015-07-31).
Oil prices fell deeper into bear-market territory on Friday,
with the commodity posting its worst monthly performance since 2008
(http://www.marketwatch.com/story/crude-poised-for-worst-monthly-performance-of-2015-2015-07-31).
The futures fell 2.9% to settle at $47.12 a barrel. Gold futures
(http://www.marketwatch.com/story/gold-on-track-for-biggest-monthly-drop-in-2-years-2015-07-31)
posted its biggest monthly drop in two years. The precious metal
ended the day up $6.5 at $1,094.90 an ounce.
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