While you were sleeping: Wal-Mart, oil data disappoint

Friday 19th February 2016

Wall Street moved lower as Wal-Mart shares dropped on a downgraded sales outlook, while oil gave up some its earlier gains after a report showing an increase in US stockpiles.

In 13.11pm New York trading, the Dow Jones Industrial Average slipped 0.1 percent, while the Nasdaq Composite Index dropped 0.6 percent. In 12.56pm trading, the Standard & Poor’s 500 Index fell 0.2 percent.

The Dow moved lower as declines in shares of Wal-Mart Stores and those of Caterpillar, last down 3.7 percent and 2.6 percent respectively, outweighed gains in shares of IBM and those of Johnson & Johnson, last up 5.1 percent and 1.7 percent respectively.

Wal-Mart posted a decline in quarterly earnings and downgraded its annual sales outlook.

“Net sales growth is now expected to be relatively flat, which compares to the previous estimate for growth of 3 to 4 percent on a constant currency basis,” the company said in a statement. “This change reflects the impact from recently announced store closures globally, as well as the continued strengthening of the US dollar. Excluding the impact of currency and store closures, our net sales growth guidance would have remained in the 3 to 4 percent growth range.”

The US jobs data remain firm. A Labor Department report showed initial claims for state unemployment benefits unexpectedly fell, declining 7,000 to a seasonally adjusted 262,000 for the week ended February 13, the lowest since November.

Recent economic data showing the US economy’s resilience have prompted analysts and investors to rethink when the Federal Reserve will lift interest rates.

“The economy is better than the markets think,” Chris Rupkey, chief economist at MUFG Union Bank in New York, told Reuters. “We wouldn't rule out another rate hike at the March meeting as financial market turbulence fades away and the economic outlook remains positive.”

Oil prices pared earlier agains after an Energy Information Administration report showed crude inventories in the US climbed by 2.1 million barrels last week. The EIA data came a day after the American Petroleum Institute reported stockpiles unexpectedly fell.

“We should see crude sell off in the days to come,” Tariq Zahir, crude oil trader and fund manager at Tyche Capital Advisors in Long Island, New York, told Reuters. “We're still in a very well-supplied market and with refinery maintenance coming up and warmer weather heading to the US East Coast, we are likely to see substantial builds in the weeks to come.”

In Europe, the Stoxx 600 Index ended the session with a gain of less than 0.1 percent from the previous close. The UK’s FTSE 100 Index dropped 1 percent. France’s CAC 40 Index added 0.2 percent, while Germany’s DAX Index rose 0.9 percent.

Shares of Nestle dropped after the world’s biggest food company predicted 2016 sales that would fall short of its goals for a fourth year in a row. The company also reported full-year profit and sales for 2015 that missed the mark, and failed to offer a share buyback some investors had hoped for.

BusinessDesk.co.nz

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