Markets shed a few points, on Monday, as investors remained concerned about companies missing their earnings estimates. Lower oil prices pulled back the energy sector while blue chips managed moderate gains and outpaced the broader market.
The Dow Jones Industrial Average (DJIA) happened to be the only gainer among the benchmarks as it increased marginally, by 0.01% to close at 12,381.11. The two other benchmarks, the Standard & Poor 500 (S&P 500) and the Nasdaq Composite Index, lost 0.28% and 0.32% to end at 1,324.46 and 2,771.51, respectively. As the markets wait for the earnings season to start officially from next week, composite volumes remained light on the New York Stock Exchange, Amex and Nasdaq with only 6.73 billion shares traded against last year's daily average of 8.47 billion. For every 5 stocks that declined on NYSE, 2 were on the gaining side.
Monday also marked the unofficial kick-off of the earnings season as Alcoa, Inc. (NYSE:AA) posted its earnings results after the bell. Although earnings results were in-line with expectations and the company managed to earn a profit on the back of higher aluminum prices, revenues fell short of analystsâ€™ expectations. Shares of Alcoa slid 3.2% in after hours trading and settled at $17.21.
Investors harbor similar concerns about corporate earnings missing estimates as higher crude prices have automatically led to inflated costs. Higher crude prices have led to higher raw materials prices along with higher transportation costs and rising food costs and all of this is likely to dent corporate results. In addition, Japanâ€™s earthquake will also adversely affect companiesâ€™ margin. Investors have stayed away from betting big bucks for the past several days and volumes have remained low. Such concerns drove the markets lower and only a positive earnings season can drive better volumes and push the markets higher.
Oil prices had taken their cue from the outbreak of violence since February 18 in the oil-rich nation of Libya. Prices had sky-rocketed to multi-year highs and recorded their highest levels since September 2008 on Friday. However, prices eased off as plans of a cease-fire seemed to take shape in the nation which in the past accounted for 2% of the global daily oil output. Benchmark crude-oil futures for May delivery on the New York Mercantile Exchange dropped $2.87 to $109.92 per barrel. According to reports, embattled Libyan leader Muammar Gaddafi accepted the peace plan proposed to him by a group of the African Union, led by South African President Jacob Zuma. The agreement was to ensure the termination of clashes between Gaddafi forces and the rebels. Jacob Zuma requested NATO to â€˜give the ceasefire a chance,â€™ and Gaddafi has accepted the peace-plans.
However, peace-talks did not help the energy sector as it slid significantly and was also the worst performer in the S&P 500 index. Shares in the energy sector like Chevron Corp. (NYSE:CVX), Halliburton Company (NYSE:HAL), Exxon Mobil Corporation (NYSE:XOM), Hess Corporation (NYSE:HES), Marathon Oil Corporation (NYSE:MRO), Chesapeake Energy Corporation (NYSE:CHK), Schlumberger Limited (NYSE:SLB) slid 1.7%, 2.5%, 0.9%, 2.9%, 1.9%, 2.0% and 2.3%, respectively.
Meanwhile, the International Monetary Fund chopped off growth estimates for the US and Japan and suggested higher crude prices will likely take a toll on the economic recovery. The IMF predicted oil would rise 36% this year to $107.16 per barrel and this projection is based on the average prices of U.K. Brent, Dubai and West Texas Intermediate crude. The US is the worldâ€™s largest oil consumer and the IMF estimates the worldâ€™s largest economy will grow by 2.8% in 2011 compared with 2.9% in 2010, down from 3% estimated in January this year. The IMF also cautioned that the nation could be at the center of further economic turmoil if the government doesnâ€™t take adequate measures to address the debt burden and an inflating fiscal deficit.
In another development, NYSE Euronext, Inc. (NYSE:NYX) dramatically rejected the joint takeover bid by Nasdaq OMX Group Inc. (NASDAQ:NDAQ) and IntercontinentalExchange, Inc. (NYSE:ICE), citing multiple concerns. However, NYSE is interested to be acquired by Frankfurt-based Deutsche Boerse AG, which was announced in February this year. Shares of NYSE slid 2.9%, Nasdaq lost 1.5% and ICE closed flat. This development subsequently dented the financial sector as it closed after losing significant points. The Financial Select Sector SPDR ended flat and some financial shares like Morgan Stanley (NYSE:MS), Citigroup, Inc. (NYSE:C) and Wells Fargo & Company (NYSE:WFC) dropped 1.3%, 0.7% and 0.7%, respectively.