Stock Market News for August 04, 2014 - Market News


Benchmarks settled in the red zone as concerns about the timing of a rate hike by the central bank rates kept investors jittery. Friday's largely positive economic data could only lift the stocks momentarily as concerns from Thursday over a spike in US labor costs and a credit default by Argentina continued to weigh on investors. The S&P 500 posted its largest weekly decline in two years. The Dow too registered its biggest weekly drop since Jan 24.

For a look at the issues currently facing the markets, make sure to read today's  Ahead of Wall Street  article

The Dow Jones Industrial Average (DJI) dropped 0.4%, to close Friday's trading session at 16,493.37. The Standard & Poor 500 (S&P 500) declined 0.3% to finish at 1,925.15. The tech-laden Nasdaq Composite Index closed at 4,352.64; declining 0.4%. The fear-gauge CBOE Volatility Index (VIX) went up 0.5% to settle at 17.03. Total volume for the day was roughly 7.2 billion shares, higher than last five day's average of 6.2 billion. Decliners outpaced advancing stocks on the NYSE. For 61% stocks that declined, 36% advanced.

Dow's loss on Friday dragged it into the negative territory for 2014. The blue-chip index has dropped 0.5% year to date.

Investors remained concerned about wage inflation, on the backdrop of robust economic growth. Investors feared that this might lead to a rise in federal funds rate sooner than anticipated.

Investors were also concerned about Argentina's debt woes. On Thursday, Standard & Poor's downgraded Argentina's credit rating to "selective default" after the government failed to pay interest on $13 billion of restructured bonds within the deadline. The South American country failed to pay debts of $539 million to bondholders after a U.S judge ruled that the country can't make debt payments until and unless hedge funds led by Elliot Management Corp. receive payments. Earlier, Argentina had failed to make debt payments to these hedge funds.

Investors also focused on U.S. and European credit markets. Prices of high-yield bonds and debt issued by European nations declined partly due to the financial crisis of Banco Espirito Santo SA and Argentina's debt woes. These high-yield bonds are generally considered to be riskier assets.

Positive domestic economic data had lifted benchmarks for a while. Economic activity in the manufacturing sector expanded in July for the 14th successive month. According to a report from the Institute for Supply Management, July PMI gained 1.8 percentage points from June's adjusted reading of 55.3% to touch 57.1%.

The University of Michigan and Thomson Reuters' final reading of consumer sentiment increased to 81.8 in July. The rise in consumer sentiment was in line with the consensus estimate.

According to the Bureau of Economic Analysis, both personal income and personal consumption expenditure increased 0.4% in June. Both increases were in line with the consensus estimate. Personal consumption expenditure had increased 0.3% in May.

The U.S. Bureau of Labor Statistics said total nonfarm payroll employment increased 209,000 in July, less than the consensus estimate of an increase by 234,000. The unemployment rate edged up to 6.2% in July from June's 6.1%.  The rise in the unemployment rate seems to suggest that the economic recovery may be less robust than expected. This eased some fears about the possibility of a sooner-than-expected rate hike.

Separately, the US Census Bureau of the Department of Commerce reported a 1.8% drop in construction spending to $950.2 billion in June from May's revised estimate of $967.8 billion. This decrease in the payout by builders on residential and nonresidential structures was in sharp contrast to consensus estimate of an increase by 0.8%.

Shares of LinkedIn Corporation ( LNKD ) surged 11.7% a day after the professional networking company's adjusted earnings per share of 4 cents beat the Zacks Consensus Estimate of breakeven figure. LinkedIn reported its results after the markets closed on Thursday.

Tesla Motors, Inc. ( TSLA ) reported adjusted loss of 14 cents per share in the second quarter of 2014, narrower than the Zacks Consensus Estimate of a loss of 24 cents. Shares of the electric car maker increased 4.5%.

The Western Union Company ( WU ) and PerkinElmer Inc. ( PKI ) led the decline among the S&P 500 components. Both the companies reported a decrease in second quarter 2014 earnings. Shares of Western Union and PerkinElmer dropped 3.9% and 3.6%, respectively.

Meanwhile, shares of The Procter & Gamble Company ( PG ) gained 3.0% after the world's largest consumer products company said it will shed about half of its brands in order to increase sales. PG's fourth-quarter adjusted earnings of 95 cents per share beat the Zacks Consensus Estimate of 91 cents. PG turned out to be the best performing stock among the Dow components.

Benchmarks finished the week on a disappointing note. For the week, the S&P 500 dropped 2.7%, its largest percentage decline since the week ended Jun 1, 2012. The blue-chip index dropped 2.8%, posting its biggest weekly drop since the week ended Jan 24. The Nasdaq too settled in the red, declining 2.2%.

Benchmarks suffered their biggest losses in months on Thursday, following a default by Argentina, and a spike in US labor costs.

Benchmarks were also negatively impacted after the U.S. and the European Union expanded economic sanctions against Russia. Separately, the Nasdaq was weighed down by declines in bio-tech stocks.

The Federal Open Market Committee (FOMC) stuck to its plan of steadily wrapping up the quantitative easing program. The Federal Reserve said the rate hike may take "considerable time" after the end of its bond buying program.

Investors also assessed Fed's mixed view on the economy. The FOMC indicated that the economy has shown significant improvement in the second quarter as most of the economic indicators such were on track. However, FOMC also said the labor market is facing problems of underutilization and the pace of recovery of the housing sector is slow.

On the economic front, pending home sales data was discouraging. A gauge of pending home sales numbers retreated in June after three consecutive months of solid growth.

Positive second-quarter GDP, encouraging private sector hiring reports and upbeat consumer confidence data failed to lift the markets.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , US Markets

Referenced Stocks: LNKD , TSLA , WU , PKI , PG

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