Cautious Investors Weigh Crude Slump on Economic Growth

Nichole Harper
12 Jan, 2015
New York City

Market averages in New York extended losses after the S&P 500 index closed down for the second week in a row. The sustained oil price decline as left investors debating the broader implications on the world economic growth outlook and the benefit to the U.S. consumers.

[R]12:20 PM New York – Market averages in New York extended losses after the S&P 500 index closed down for the second week in a row. The sustained oil price decline as left investors debating the broader implications on the world economic growth outlook and the benefit to the U.S. consumers.[/R]

Stocks on Wall Street extended losses on Monday after market indexes declined for the second week in a row for the first time in four months.

Market averages have remained volatile as investors digest the implication of lower crude oil price for consumers and global economic growth. The two contrasting forces unleashed by a dramatic fall in oil prices has left investors debating the future course of market indexes.

Analysts have been trimming the down the earnings growth expectations for companies in the S&P 500 index to less than 2.5% increase from the previous estimate of as high as 9%.

Also, investors have been concerned about the weak holiday retail sales and health of the banks in Texas and Oklahoma where many leveraged oil drillers are expected to struggle to repay loans.

On Wall Street trading, Tollbooth Strategy Index fell 0.4% or 43.63 to 9,879.57.

S&P 500 index fell 10.67 or 0.5% to 2,034.02 and the Nasdaq Composite Index slipped 27.71 or 0.6% to 4,676.44.

U.S. Movers

AmerisourceBergen Corp rose 21 cents to $93.21 after the pharmaceutical products retailer agreed to acquire MWI Veterinary Supply Inc, animal health distribution group for about $2.5 billion or $190 per share in cash.

The transaction is expected to close during the March quarter.

Shares of MWI Veterinary Supply, Inc surged 8.6% to $190.80.

SanDisk Corporation ((SNDK)) plunged 13.8% or $13.44 to $83.62 after the data storage solution provider forecasted revenues for the fourth-quarter of about $1.73 billion, lower than the earlier range of between $1.8 billion and 1.85 billion.

The company also lowered its quarterly non-GAAP gross margin to 45% from the previous estimate between 47% and 49%.

European Markets

In London trading, FTSE 100 index slid 0.04% or 2.82 to 6,498.32 and in Frankfurt the DAX index gained 0.9% or 86.69 to 9,735.19.

In Paris, CAC 40 index increased 0.9% or 37.60 to 4,216.67.

Continental AG gained 1.9% to €174.60 after the Germany-based automobile parts supplier said despite negative exchange rate sales for the year increased to €34.5 billion and adjusted EBIT jumped to €3.8 billion from a year ago period.

The company said the impact on exchange rate affected sales adversely by €500 million.

Roche Holding AG, the Switzerland-based pharmaceuticals and diagnostics company agreed to acquire a majority stake in molecular and genomic analysis company Foundation Medicine Inc for about $1.18 billion.

Shire Plc slipped 0.7% to 4,707pence after the Ireland-based drug-maker agreed to acquire U.S.-based NPS Pharmaceuticals Inc for $5.2 billion or $46 per share in cash.

Asian Markets

In Mumbai trading, Sensex Index gained 126.89 or 0.5% to close at 27,585.27. The CNX Nifty added 38.50 or 0.5% to 8,323.

Investors from U.S., Japan and Australia announce investment plans at Vibrant Gujarat summit held at Gandhinagar.

Adani Enterprises Limited advanced 1.9% to Rs 515.50 and the oil and gas explorer signed an agreement with Australia-based Woodside Energy for oil & gas exploration and production opportunities.

The company also plans invest $4 billion in partnership with U.S.-based SunEdison Inc to set up solar photo-voltaic manufacturing unit in Gujarat.

United Spirits Limited soared 6.6% to Rs 3,050.45 after the company won a shareholder approval to merge subsidiary of its parent Diageo plc and also passed a resolution to make and sell products made by the parent company.

Diageo won the majority control in the company after a protracted takeover bid in July 2014 and increased its stake in the company from 26% to 54.78%.

Vijay Mallaya’s stake in the company has been cut down to 2% after the promoter was forced to sell his stake to cover losses and debt repayment linked to now defunct Kingfisher airline.