Investors' cautious stance ahead of key economic announcements
through this week left the benchmarks languishing in the red.
Investors are apprehensive about what the central bank has to say
about economic measures after its two-day policy meet concludes on
Wednesday. Separately, the European Central Bank's meeting is
scheduled on Thursday, and its outcome gained importance after
Mario Draghi pledged last week to do "whatever it takes" to keep
the euro-zone intact. Nonfarm payroll data is also slated for
release this week.
The Dow Jones Industrial Average (DJI) dropped 0.5% and closed
at 13,008.68. The Standard & Poor 500 (S&P 500) was down
0.4% and finished yesterday's trading session at 1,379.32. The
tech-laden Nasdaq Composite Index slipped 0.2% to end at 2,939.52.
The fear-gauge CBOE Volatility Index (VIX) gained 5% to settle at
18.93. Consolidated volumes on the New York Stock Exchange, the
Nasdaq and the American Stock Exchange were 6.5 billion shares,
lower than this year's daily average of 6.74 billion. Decliners
dominated advancing stocks on the NYSE; as for 57% stocks that
declined, 39% stocks ended higher.
Markets had no major headlines to guide them through the day.
What affected investors' mood were their hopes and apprehensions
about the outcome of the central banks' meet on both sides of the
Atlantic and key jobs data. Investors had renewed hopes about a
third round of quantitative easing (QE3) and a bagful of dismal
economic readings strengthened those hopes.
Federal Reserve Chairman Ben Bernanke has been critical about
the state of the economy in his latest congressional testimony in
July. He noted that the pace of improvement in unemployment remains
"frustratingly slow". He had also mentioned: "It may be possible
that we will take additional action if we conclude we are not
making progress towards higher levels of employment". Therefore,
QE3 hopes were kept alive and investors have now adopted a wait and
watch stance as the two-day policy meet of the Federal Reserve's
policy makers concludes on Wednesday.
Meanwhile, the government is due to report nonfarm payroll data
on Friday. Investors are keen to see what state the labor market is
in. The report will follow initial claims data to be released by
the Labor department on Thursday. In the previous report, the
advance figure for seasonally adjusted initial claims had dropped
35,000 for the week ending July 21.
Apart from what is slated for release this week, yesterday the
Conference Board reported an increase in Consumer Confidence Index.
The index rebounded from a decline in June to rise to 65.9 in July.
This was significantly higher than consensus estimates of 61.9 and
June's reading of 62.7. Also, the Expectations Index was up to 79.1
in July from 73.4 in June. However, Lynn Franco, Director of
Economic Indicators at The Conference Board, noted: "Despite this
month's improvement in confidence, the overall Index remains at
historically low levels. Consumers' attitude regarding current
conditions was little changed in July, but their short-term
expectations, which had declined last month, bounced back".
In tune with the decline in broader markets, the retail sector,
that reflects consumer spending, also ended in the red. The SPDR
S&P Retail (XRT) was down 0.6% and stocks including Macy's,
), Saks Inc (NYSE:
), Dillard's, Inc. (NYSE:
), The Bon-Ton Stores, Inc. (NASDAQ:
), Wal-Mart Stores, Inc. (NYSE:
), PriceSmart, Inc. (NASDAQ:
) and Family Dollar Stores, Inc. (NYSE:
) declined 2.2, 1.6%, 2.4%, 0.8%, 0.7%, 1.1% and 0.9%,
On the other side of the pool, ECB President Mario Draghi's vow
will now be put to the test as an ECB meeting in scheduled for
Thursday. Investors now await concrete action or at least a plan
arising out of Mario Draghi's comments last week to do "whatever it
takes" to keep the Euro-zone intact. He had also sparked off hopes
that the central bank would buy Spanish and Italian bonds.
Reportedly, Mr. Draghi had commented: "While it will take another
few days or even weeks to finalize the device in question, the ECB
would prepare an operation coordinated with the states may limit
the surge in interest rates of Spain, but also the Italy". However,
Germany is against these measures. Investors are thus keen awaiting
the next development in this connection and their wait and watch
attitude restricted them from betting big.
BON-TON STORES (BONT): Free Stock Analysis
DILLARDS INC-A (DDS): Free Stock Analysis
FAMILY DOLLAR (FDO): Free Stock Analysis Report
MACYS INC (M): Free Stock Analysis Report
PRICESMART INC (PSMT): Free Stock Analysis
SAKS INC (SKS): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis
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