Market Monitoring – 19 November 2013

Edited by Vani Rao

Stock markets reach historichighs; tumble after Icahn spooks markets

The Dow Jones Industrial Average breached the 16,000 mark, an all-time high, but failed to hold on to that level, ending at 15,976.02 up by14.32 points, or 0.1% on 18 November.The S&P 500rose to a record of 1,802.37 points but fell 6.65 points, or 0.4%, to finish the day at 1,791.53, while the Nasdaq Composite Index dropped 36.90 points, or 0.9%, closing at 3,949.07.

Source: Bloomberg
Source: Bloomberg

Stock markets rose in Monday morning trading, joining global markets on upbeat European trade data and positive reactions to Chinese reforms as well as the encouragement from Janet Yellen that the monetary stimulus will continue. Stocks however lost momentum in afternoon trading after veteran investor Carl Icahn stated at the Reuters Global Investment Outlook summit thathe is “very cautious” on equities. The billionaire activist investor said that a “big drop” could come in stocks because earnings of many companies are fuelled by low borrowing cost rather than a strong management.

Movers and Shakers

mm pic 2Eight out of the 10 major industries index in the S&P 500 reported a fall, with S&P Consumer Discretionary Index retreating 0.72% to pace declines whereas S&P Telecommunication Services Index posting a decent gain of 0.61%. S&P Financial and S&P Utilities sectors remained flat during the day.

mm pic 3Apple (NASDAQ:AAPL)shares tumbled 1.2% on Monday on Icahn’s comments that he will not fight with Apple’s Boardof Directors and that he would not sell his stake in the company.

mm pic 4Microsoft Corp. (NASDAQ: MSFT) declined 1.7% to end at $37.20 after Bank of America Corp. (NYSE: BAC) cut its rating to “Underperform” from “Neutral”.

mm pic 5Consol Energy Inc. (NYSE:CNX) fell 4% to $34.56. Citigroup Inc.(NYSE:C) cut the coal producer’s rating to“Neutral”from“Buy”.

Peabody Energy Corp. (NYSE:BTX), the largest US coal producer, lost 3.7% to $19.36.

Tesla Motors Inc. (NASDAQ:TSLA) shed 10% to $121.58, extending the slide that wiped out nearly 40% since October 2013. Safety officials are investigating an industrial accident at the company’s plant that injured three workers; the stock is still up almost 270% so far this year.

Boeing(NYSE:BA) shares rose 1.7% to $138.36, after the aircraft maker said that it has garnered sales of more than $95 billion from its newly launched 777X wide-body planes, a record for a new commercial aircraft.Boeing has gained more than 85% this year and is one of the biggest gainers in the Dow.

Tyson FoodsInc. (NYSE:TSN), the largest US meat processor, climbed 2.3% to $29.42, after reporting revenue of $8.89 billion, beating analysts’ estimates.


US crude oil futures edged lower on Monday following ongoing concerns over a slowdown in demand from the US. The concerns continued to weigh down on the Decembercrude, whichlost 81 cents, or 0.9%, to settle at $93.03 a barrel on the New York MercantileExchange.

Gold prices dropped on Monday after the Federal Reserve Bank of New York President William C.Dudley said he was hopeful that the US economy would improve. Dudley also added that fiscal uncertainties may no longer be dragging down recovery stoking sentiments and that the Fed will begin scaling monetary stimulus more likely sooner than later.

In the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at $1,273.00 during US afternoon hours, down 1.12%.

Elsewhere on the Comex, silver for December delivery was down 1.80% at $20.35 a troy ounce.

Top Stories

Protesting employees win round one vs. Wal-Mart

Wal-Mart (NYSE: WMT),the world’s largest private employer, would face legal troubles after the National Labor Relations Board (NLRB) announced on Monday that it has found merit in charges against the company.

Wal-Mart, in its statements on national TV and to employees at Wal-Mart stores in California and Texas, illegally threatened “reprisal” for workers who protested on November 22, 2012, NLRBsaid.

The protests were organized by the union-backed group OUR Wal-Mart, which has been pushing the company for years to raise wages and benefits for its employees.

Federal officials said that they are prepared to file formal complaints against the giant retailer if they fail to reach a settlement in the next week or two.

Wal-Mart spokesperson Brooke Buchanan said the company will pursue its “options to defend” itself, noting that it takes labor laws very seriously.

Exxon Mobil sells stake in Hong Kong’s Castle Peak

Exxon Mobil Corp. (NYSE:XOM) has settled a deal with CLP Holdings and the state-owned China Southern Grid to sell the majority its stake in Castle Peak Co. Ltd., a Hong Kong-based utility and a power storage firm, for a total value of $3.4 billion. CLP Holdings will control 70% of Exxon’s total stake, while China Southern Grid will own the remaining 30%. Castle Peak will use the funds for investment in its core business and to increase shareholders value via buybacks or dividend announcements. Exxon Mobil Corp.’s stock rallied 10.28% on Monday’s trade to close at $95.45.

News to look forward to in next 24 hours

Employment Cost Index: The US Department of Labor would release its quarterly Employment Cost Index (ECI) report, which is a measure of total employee compensation costs and salaries as well as benefits.

The ECI helps evaluate wage trends and risk of wage inflation, which is high on the Federal Reserve’s list. Labor costs tend to increase when economic activity is booming and labor demand rising rapidly. During economic downturns, wage pressures tend to be subdued as labor demand decreases.

Labor cost can help investors in gauging how the economy is performing and whether a price rise is on the horizon. If there is awage inflation, there are possibilities that interest rates will rise, whilebond and stock prices will fall.

The ECI for Q2 increased by 0.5% for the second straight quarter, but is still under 2%. The ECI is expected to follow the earlier trend during Q3 as well.

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