In U.S. trading on Wednesday, stocks ended the volatile trading session lower. This came after the Federal Reserve left the chance of an interest rate hike as early as June open in their statement which followed their two-day policy meeting. The central bank also said that the slowdown in the first quarter was as a result of transitory factors and it expects the U.S. economy to rebound. At the close of U.S. trading, the S&P 500 index (SPX) closed 7.91 points, or 0.4%, lower at 2,106.85. The top performer on the SPX was Genworth Financial Inc. (NYSE:GNW) which rose 11.64% to 8.92. Losses were led by consumer staples, health care and consumer discretionary companies. Also on the downside was the Nasdaq Composite index (COMP) which dropped 31.78 points, or 0.6%, to 5,023.64. Following the downward trend was the Dow Jones Industrial Average (DJIA) which dropped 74.61 points, or 0.4%, to 18,035.53. The best performer of the session on the DJIA was Caterpillar Inc. (NYSE:CAT), which rose 1.51% or 1.30 points to trade at 87.50 at the close. Meanwhile, J.P. Morgan Chase & Co (NYSE:JPM) added 1.34% or 0.84 points to end at 63.60 and Visa Inc. (NYSE:V) was up 0.85% or 0.57 points to 67.34 in late trade. Also, the CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was up 7.82% to 13.38.
USD Lower As Poor US Data Weighs
In currency trading on Wednesday, the U.S. dollar declined against most major currencies. This came after data showed that the economic growth in the U.S. slowed more sharply than expected in the first quarter. As a result of this, expectations for interest rate hikes were curbed. In their report, the Commerce Department stated that gross domestic product (GDP) in the U.S. grew just 0.2% in the three months to March. This marked the slowest rate of growth in a year as well as a slowdown from the final quarter of 2014 which was at 2.2 percent. In a separate report also on Wednesday, the National Association of Realtors said that its pending home sales index increased 1.1% last month. This beat expectations for a 1.0% gain. Meanwhile, pending home sales in February rose by 3.6%, whose figure was revised up from a previously reported gain of 3.1%. In forex trading, the EUR/USD traded at 1.1127, up 1.32%. The single currency was boosted after data earlier on Wednesday showed that German consumer prices rose at an annual rate of 0.4% in April. This was broadly in line with market expectations, easing concerns over the threat of deflation in the euro area. Meanwhile, against the Japanese yen and the Swiss franc, the greenback traded mixed with USD/JPY steady at 118.93 and with USD/CHF down 1.59% to 0.9404. Also, the GBP/USD advanced 0.66% to two-month highs of 1.5439. Against the currencies in Australia, New Zealand and Canada, the U.S. dollar traded mixed with AUD/USD up 0.46% to 0.8057, NZD/USD steady at 0.7721 and with USD/CAD down 0.52% to trade at 1.1970. Also, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.97% to 95.26. This marked the weakest level since the 18th of March.
NYMEX Crude Declines
On Thursday, in early Asian trading, crude oil prices declined. On the New York Mercantile Exchange, WTI crude for delivery in June traded at $58.46 a barrel, down 0.21%. Meanwhile, overnight on Wednesday, crude futures rose to reach their highest level since December. This came in response to a lower than expected buildup last week which eased continuing supply concerns. In their weekly report on Wednesday, the Energy Information Administration (EIA) said that crude inventories increased by 1.9 million barrels for the week that ended April 24. This buildup was far below consensus estimates of a 3.3 million barrel increase. Meanwhile, the build pushed up the current U.S. crude inventories to 490.9 million barrels which is the most in at least 80 years. In addition, crude inventories at the Cushing Oil Hub in Oklahoma fell by 514,000 on the week which was well below forecasts of a 400,000 gain. The decline marked the first draw at the largest crude storage facility in the U.S. since last November. Also on Wednesday, on the Intercontinental Exchange (ICE), Brent crude for June gained 1.19 or 1.84% to trade at 65.83 a barrel.
In the Spotlight – Samsung Profits Decline – Sales Slow
On Wednesday, Samsung Electronics Co. reported first quarter earnings. From the information released, it is evident that the company struggled in the first three months of the year while they also raised the stakes for the success of their new flagship Galaxy S6 smartphone.
According to Samsung, their net profit for the first quarter was $4.3 billion (4.63 trillion Korean won). This marked a 39 percent decrease from a year earlier while it also missed expectations for a 30% decline. Also, the company’s mobile division failed to impress as consumers turned towards Apple Inc.’s new iPhones as well as other devices which were made by Chinese brands like Xiaomi Corp. As a result, Samsung’s operating profit declined to 2.74 trillion won, 57% lower than a year earlier.
On the upside, Samsung’s mobile operating profit margins rose to 10.6% for the quarter. This marked an increase from the 7.5% in the fourth quarter of 2014. According to the company, this increase was as a result of lower marketing costs and improved sales of midrange smartphones. Samsung executives have said that they are now hoping to maintain mobile profit margins in “the low double digit” percentage range. While this is positive, it is also a far cry from the nearly 20% margins that Samsung enjoyed in 2012 and 2013. In order to achieve their goals, Samsung has stated that they will reduce marketing expenditures.
It is interesting to note that the success in Samsung’s mobile division is as a result of the strength of the Galaxy S6 and its curved-screen companion the Galaxy S6 Edge. These phones went on sale in 20 countries around the world on April 10 and according to analysts, these phones could account for as much as a quarter of total smartphone sales in the second quarter.
Meanwhile, margins for Samsung’s chip unit continued an upward climb to 28.5% compared with a 20.8% margin logged in the year-ago period. This increase came as a result of tight supply and solid pricing. Finally, total company revenue slipped 12% to 47 trillion won. This was in line with estimates provided by Samsung earlier this month.