US Stocks Tumble as Oil Rig Count Climbs
New York (Dec 19) Stocks continued their slide on Friday afternoon as a rise in active oil rigs in the U.S. pressured crude oil prices. The S&P 500 was down 1.2%, the Dow Jones Industrial Average slid 1.6%, or 274 points, and the Nasdaq fell 1.1%.
Crude oil fell as a weekly count of active rigs increased for the first time in five weeks. Data from Baker Hughes showed the number of oil-drilling rigs climbed by 17 to 541. West Texas Intermediate crude oil fell 0.74% to $34.69 a barrel on Friday. The commodity had closed at its lowest level since 2009 on Thursday after data on U.S. inventories stoked fears over a supply glut.
Also moving commodity markets Friday was the U.S. House of Representatives passage of a $1.1 trillion spending bill that provides funding to government agencies through September 2016 and also lifts a 40-year-old ban on U.S. crude oil exports. The bill has been sent to the Senate. Detractors of the ban had argued that limitless oil exports would boost the U.S. economy and bolster national security.
Trading was more volatile during the quadruple-witching session, one of four days of the year in which futures and options contracts expire at once. The Volatility Index, otherwise known as the "fear index," increased 4.3% to 19.75.
The Bank of Japan unveiled an unexpected new stimulus program on Friday, surprising investors and pulling the U.S. dollar lower against the Japanese yen. The central bank said it would begin buying exchange-traded funds which include firms making investment in "physical and human capital." The BOJ has approved purchases at an annual rate of 300 billion yen ($2.46 billion).
Disney (DIS) fell 3.5% on concerns that ESPN will generate less profits in 2016 than it did this year. The influential media analyst Rich Greenfield of BTIG, in an investor note, downgraded Disney shares to "sell," something analysts rarely do, arguing that ESPN was too aggressive in securing long-term sports rights contracts.
"Not only did Disney overpay for individual sports rights packages, they also acquired too many sports rights in an effort to prevent new competitors such as Fox Sports 1 and NBC Sports from growing stronger," Greenfield wrote.
BTIG's downgrade comes as Disney climbed 19% this year before Friday compared to the S&P 500 that has fallen 1.7% this year and the S&P 500 Media Index, which has dropped 5% even as it includes Disney.
GlaxoSmithKline (GSK - Get Report) agreed to buy Bristol-Myers' (BMY - Get Report) pipeline of HIV drugs for up to $1.5 billion to beef up its own portfolio. The drugmaker will pay $317 million upfront for its late-stage HIV drugs with another $518 million depending on certain commercial milestones. GlaxoSmithKline's HIV drug sales jumped 65% in its third quarter.
Amazon (AMZN - Get Report) is reportedly looking to lease 20 Boeing (BA - Get Report) 767 jets to use for its own deliveries, according to The Seattle Times. The e-commerce company is seeking an alternative to United Parcel Service which has struggled to keep up with demand.
Lennar (LEN - Get Report) added 2.5% Friday after posting solid quarterly results that beat analysts' estimates. Revenue from home sales increased 16% over the quarter, while home deliveries jumped 9%.
BlackBerry (BBRY) climbed 10% after narrowing losses in its recent quarter. The smartphone company reported a loss of 3 cents a share, narrower than an estimated loss of 15 cents. Revenue fell to $548 million over the quarter, though came in above expectations of $489 million.
Darden Restaurants (DRI) rose 7% after setting a new $500 million stock buyback program and boosting its quarterly dividend 14% to 50 cents a share. The restaurant chain owner also earned 54 cents a share in its second quarter, 2 cents above estimates.
Red Hat (RHT) was more than 2% higher on Friday after a better-than-expected third quarter. The software developer earned 48 cents a share, 2 cents above estimates, while revenue jumped 15% to 523.6 million.