Oil Shares Weigh On Dow Industrials

By Leslie Josephs 

        Oil majors pulled the Dow Jones Industrial Average lower in afternoon trading Friday after a report indicated an increase in U.S. oil drilling.
        The Dow Jones Industrial Average fell 34.15 points, or 0.2% at 17709.20, down from a high Friday of 17783.5. The S&P 500 also turned lower. It dropped 0.1%, or 1.4 points, at 2107.20.
        The Nasdaq Composite Index gained 7.7 points, or 0.2%, to 5136.48.
        Global stocks were mixed on Friday as investors weighed downbeat earnings reports from big oil companies and a report showing marginal growth in U.S. wages, which cast some doubt over whether the Federal Reserve would raise interest rates in the coming months.
        On the other side of the Atlantic, the Stoxx Europe 600 rose less than 0.1% to 396.37.
        The number of active U.S. oil rigs rose by five this week--the second consecutive weekly increase--to 664, oil-services firm Baker Hughes said Friday afternoon. Oil futures fell further after the data was released, with Nymex crude down $1.30, or 2.7%, at $47.24 a barrel.
        Shares of oil majors, already hit by weak earnings reports, fell further. Exxon Mobil Corp., the biggest U.S. oil company, reported a 52% decline in profit for its second quarter. Shares fell 4.5% to $79.28.
        Chevron shares were 4.9% lower at $88.52 after it reported $2.6 billion in charges in its quarterly statement tied to lower oil prices.
        "That should not surprise anyone," Randy Frederick, managing director of trading and derivatives at Charles Schwab, said of the oil companies' results.
        But a report showing paltry U.S. wage growth helped limit losses as it cast some doubt that the Federal Reserve would raise interest rates in the coming months.
        The U.S. employment-cost index, a measure of workers' wages and benefits, rose a seasonally adjusted 0.2% in the second quarter from the first quarter, the Labor Department reported Friday. The gains marked the smallest quarterly rise since record-keeping began in 1982, and fell below economists' expectations of a 0.6% increase. The quarterly measure of U.S. labor costs indicated stagnated wages, casting some doubt on the Federal Reserve's plans to raise rates in the coming months.
        "I think what the markets are reading is that once again this is another one in the column for "no" in September," said Jeffrey Yu, head of single-stock derivatives trading at UBS AG.
        Even if the Fed were to raise rates by a quarter percentage point, it wouldn't likely encourage investors to sell stocks and pile into other asset classes like bonds, said Gordon Charlop, managing director at Rosenblatt Securities.
        "What does a quarter [percentage] point do? Does it mean I'm going to sell all my equities? I don't think so," Mr. Charlop said. "It's like jumping off a snake's belly."
        Shares of Coca-Cola Enterprises Inc. rallied 13.3% at $51.48 following news of merger talks with Coke bottlers Coca-Cola Iberian Partners and Germany's Coca-Cola Erfrischungsgetranke AG.
        Shares of Hanesbrands Inc. dropped 10.68% to $30.50 after the apparel maker posted second-quarter sales below analyst estimates
        Shares in Airbus Group climbed after the plane maker reported a rise in second-quarter profit. French bank BNP Paribas and chemical company Arkema both rose after better-than-expected results. Steel pipe maker Vallourec fell after reporting a loss for the first half of the year.
        Among companies on the Stoxx Europe 600 that have so far reported second-quarter results, 54% have exceeded profit expectations, according to FactSet data. That compares with 50% in the first quarter.
        "The earnings season in Europe has been pretty good," said Christian Stocker, an analyst at UniCredit. Concerns over the Chinese economy are likely to remain and could hold back shares in mining companies and car makers in the coming months, he said.
        Shares in the U.S. and Europe had fallen sharply at the start of the week as a slump in Chinese equities spilled over into global markets, but they have since more than recovered those losses as investors turned to corporate earnings and clues on the timing of a Federal Reserve rate increase.
        The dollar weakened 0.9% against the euro, as one euro bought $1.1025 versus $1.0933 on Thursday. Currency markets have gyrated in recent months amid an uncertain outlook for U.S. and global growth, as well as questions about whether the Fed will raise the short-term benchmark interest rate in September. Higher interest rates would make the dollar a more alluring investment.
        Gold prices were recently up 0.6% at $1,095.50 a troy ounce on the Comex division of the New York Mercantile Exchange. A weaker dollar lent support to the precious metal, which is priced in dollars and becomes less expensive for investors using stronger currencies. Still, gold is on track to post a 6.5% monthly loss in July, the worst drop since April 2013.
        Tommy Stubbington and James Ramage contributed to this article.
        Write to Leslie Josephs at leslie.josephs@wsj.com
        (END) Dow Jones Newswires

        July 31, 2015 14:24 ET (18:24 GMT)

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