Market Commentary – May 21, 2014

Edited by Vani Rao

US markets volatile amid earnings season

The US equity markets started off the week on a positive note on Monday, May 19, 2014, as all the three major indexes mapped gains. The S&P 500 and Dow Jones Industrial Average gained 0.37% and 0.27%, respectively, while the NASDAQ Composite Index finished the day 0.52% higher. The positive momentum was also observed in nine out of ten sectors, led by Telecommunication Services, which rose 1.69%, while Consumer Discretionary and Information Technology gained 0.69% and 0.64%, respectively, to usher gains in the broader markets.

However, on Tuesday, May 20, 2014, the US markets witnessed a reversal of its gains, putting a halt to its two-day rally. The trading session on Tuesday witnessed a huge selling pressure, as a result of which all the three indexes posted heavy losses, as indicated in the graph below. The Dow Jones Industrial Average nosedived 138 points to finish at a three-week low. Heavy profit booking was seen in the Telecommunication Services, Industrials, and Consumer Discretionary sectors, which fell by 1.66%, 1.30%, and 0.86%, respectively, on Tuesday, May 20, 2014. To read on the Technical Analysis of the Dow Jones, please click here.

Source: Bloomberg
Source: Bloomberg

Retail Earnings Trigger Bearish Sentiment

The financial results of retail giants like Staples, Urban Outfitters, The TJX Companies, and Best Buy were the centre of focus on Tuesday. The flurry of disappointing results by retail companies triggered a bearish sentiment in the broader markets. Moreover, the lower-than-expected financial results by retailers have raised concerns about the consumer spending in the US. Wall Street will keep a close track on earnings of retail companies, as more retailers are slated to announce their quarterly results in the coming days.


Shrugging off the overall bearish sentiment, few stocks made a headway during the trading session on Tuesday. The shares of the below-mentioned companies finished the top gainers of the day:

  • Shares in E-House China Holdings Ltd. (NYSE:EJ), a leading real estate company in China, surged 12.71%, helped by its strong quarterly results in which the company reported a 40% revenue increase on a YoY basis.
  • Insmed Inc.’s (NASDAQ:INSM) stock rose 6.72% after the biopharmaceutical company announced a positive data from its Phase 2 clinical trial.
  • Shares in Qunar Cayman Islands Ltd. (NASDAQ:QUNR), a China-based online travel commerce platform provider, gained 6.03% to finish the day at $22.50.


The following stocks triggered heavy losses for the US equity markets during the trading session on Tuesday, May 20, 2014.

Dick’s Sporting Goods Inc. (NYSE: DKS) emerged as the worst-performing stock in the S&P Retail Select Index. The stock fell by 17.98% to close at $43.60, as the company’s quarterly results showed a sharp decline in its golf-gear sales. Moreover, the company’s sales and earnings outlook for the entire year shook investor confidence.

Shares in Staples Inc. (NASDAQ:SPLS) plunged by 12.55% on back of company’s disappointing Q1 FY2014 results. Q1 sales decreased by 3% and the company is expecting sales to dip further in Q2 FY2014. To read further about Staples earnings please click here.

Urban Outfitters Inc.’s (NASDAQ:URBN) sluggish results too raised concerns about the growth of retail industry. During Q1 FY2014, the company reported a drop in its profits, driven by higher expenses. The company’s shares slid 8.82% on Tuesday, closing the day at $32.98.

Shares in Best Buy Co. Inc. (NYSE:BBY) and The TJX Companies Inc. (NYSE:TJX) also fell by 5.59% and 7.62%, respectively, adding to the rally of feeble retail stocks.

Global Market Snapshot

The global markets too represented a gloomy picture for investors on Tuesday, as the majority of the markets in Europe and the Asia Pacific closed in the red. However, India’s benchmark Nifty 50 Index managed to move higher, recording fresh highs of 7,275.50. The index carried forward the momentum generated by a clear mandate from a Bharatiya Janata Party-led government in the recently concluded elections.

Following losses on Wall Street, the FTSE 100 Index finished the session 0.62% lower at 6802.00, on Tuesday May, 20, 2014, as indicated in the graph below. The FTSE 100 Index was pulled down by heavily weighted telecom Vodafone, which closed down around 5%.

Source: Bloomberg
Source: Bloomberg

Meanwhile a mixed sentiment was observed in the Asian markets. Japan’s Nikkei 225 Index finished the session at 14,075.25, down 0.24%, as investors were cautious ahead of a Bank of Japan monetary policy decision. On the other hand, the Hong Kong Hang Seng Index rebounded from its previous day’s losses, to close at 22,834.68, as indicted in the graph below.

Source: Bloomberg
Source: Bloomberg


Source: Bloomberg
Source: Bloomberg


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