Discouraging reports on private sector hiring dampened
investor sentiment on Wednesday. Investors turned cautious
following comments made by Defense Secretary Chuck Hagel
regarding North Korea. Meanwhile, comments from president of San
Francisco Federal Reserve John Williams added fuel to investor
concerns. All the top ten S&P 500 industry groups suffered
losses, among which energy stocks suffered the most.
The Dow Jones Industrial Average (DJI) fell 0.8% to close the
day at 14,550.35. The S&P 500 lost 1.1% to finish yesterday's
trading session at 1,553.69. The tech-laden Nasdaq Composite
Index declined 1.1% to end at 3,218.60. The fear-gauge CBOE
Volatility Index (VIX) gained almost 11.2% to settle at 14.21.
Consolidated volumes on the New York Stock Exchange, American
Stock Exchange and Nasdaq were roughly 7.1 billion shares, above
2012's average of 6.48 billion shares. Declining stocks
outnumbered the advancers. For the 23% that advanced, 75%
Weak private sector employment numbers came as a surprise to
investors. According to the National Employment Report released
by Automatic Data Processing (NASDAQ:
), on a seasonally adjusted basis, 158,000 jobs were added in
March. These numbers are well below the figure of 237,000 added
in February. Of the 158,000 jobs added, 74,000 jobs were added by
small business while 37,000 and 47,000 were added by medium and
large businesses respectively. Initial claims data and the
unemployment rate, due on Thursday and Friday, respectively will
determine investor sentiment going forward.
According to the Institute of Supply Management (ISM), the
Non-Manufacturing Index (NMI) came in at 54.4% in March. This was
1.6% lower than the figure reported in February. Among the
fifteen industries included in the index, only two sectors,
imports and supply deliveries, grew month over month.
Investor sentiment was also affected by comments the president
of San Francisco Federal Reserve, John Williams. He said that if
the economy continues to improve and post strong economic
numbers, like in recent months, there is a possibility that
monetary stimulus will be withdrawn. Since the start of 2013, the
markets have witnessed strong corporate results, an improving
housing sector and a brighter job scenario. The Federal Reserve's
stimulus package has also helped markets rise significantly.
"I expect we will meet the test for substantial improvement in
the outlook for the labor market by this summer. If that happens,
we could start tapering our purchases then," San Francisco
Federal Reserve Bank President John Williams said in remarks
prepared for delivery to Town Hall Los Angeles. "If all goes as
hoped, we could end the purchase program sometime late this
year," he added.
On the international front, Defense Secretary, Chuck Hagel
today said U.S. leaders will take North Korean threats seriously
and will take appropriate actions for defense. According to the
U.S. Department of Defense, North Korea has threatened to attack
Seoul, South Korean capital, and launch missiles on Guam, Hawaii
and western United States. In response to the North Korean
threat, the Department of Defense has sent a land-based missile
defense system to Guam, 2,000 miles from South Korea. This move
has been taken to defend from possible North Korean attacks.
Hagel described the threat as "a real and clear danger and
threat" to the United States.
Energy stocks were the biggest losers among the top ten
S&P 500 industry groups. The Energy Select Sector SPDR (XLE)
lost 1.9%. Stocks such as Chevron Corporation (NYSE:
), Exxon Mobil Corporation (NYSE:
), Hess Corp. (NYSE:
), Schlumberger Limited. (NYSE:
) and ConocoPhillips (NYSE:
) declined 1.0%, 0.7%, 2.8%, 1.1% and 1.3%, respectively.
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