How the Tech Sector and Downbeat Earnings Hobbled SPY


Jan. 28 2016, Published 6:39 p.m. ET

Sector performances after the Fed’s decision not to hike

The following graph shows the performances of the component sectors of the SPDR S&P 500 ETF (SPY) as of January 27, 2016.

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The energy sector just fell off oil’s rising wave

According to the petroleum status report for the week ended January 22, 2016, released by EIA (Energy Information Administration), there’s been a surge in crude oil inventory by 8.4 million barrels, implying that the supply glut of oil is deepening.

Still, US crude futures rose by 2.7% to settle at $32.30 per barrel on the day. Brent crude went up by 4.1% and closed at $33.10 per barrel on Wednesday, January 27. This lift in oil prices has been attributed to Russia’s initiative to discuss oil production cuts with OPEC member countries.

Russia is currently in talks with OPEC (Organization of Petroleum Exporting Countries) nations about the possibility of reducing oil oversupply with the help of cooperative efforts that would boost oil prices in future. This caused oil and gas drilling companies Nabors Industries (NBR) and Hess Corporation (HES) to rise by 6.2% and 5.9%, respectively, on January 27.

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Tech stocks, Total System Services, and Apple take beatdowns

Total System Services (TSS) landed at the bottom of SPY after the company reported its earnings, which missed analyst expectations. Total System Services posted earnings of $0.57 per share, compared to the company’s estimated EPS of $0.60.

While the company reported revenues of more than $716.8 million for the fourth quarter, compared to its estimated revenues of nearly $691.9 million for the period. Some analysts regard the stock as “oversold” because its RSI (relative strength index) hit a level of 23.5. Please note that an RSI below 30 implies that a company’s stock is undervalued and oversold.

The downgrade and the tech sector

However, analysts at First Analysis Sec have downgraded the stock from “overweight” to “equal weight.” The technology sector was also weighed down by Apple (AAPL), and Red Hat (RHT), which we’ll look in the next part of this series.

Continue to the next part for a look at SPY’s key stock reactions on Wednesday, January 27.


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