Weak Japanese GDP data affected the domestic mood and dragged
the benchmarks lower on Monday. The dismal economic reading from
Japan came on the heels of disappointing data from China, thus
highlighting the concerns in the Asian territory while Europe keeps
struggling with its debt woes. With yesterday's fall, the S&P
500 ended its longest winning stretch since December 2010. The
technology sector was one of the few bright spots, and tech-laden
Nasdaq was the only benchmark to manage a positive finish.
The Dow Jones Industrial Average (DJI) dropped 0.3% and closed
at 13,169.43. The Standard & Poor 500 (S&P 500) slipped
0.1% to end just 1.76 points lower at 1,404.11. The tech-heavy
Nasdaq Composite Index managed to add 0.1% and finished yesterday's
trading session 1.66 points higher at 3,022.52. The fear-gauge CBOE
Volatility Index (VIX) dropped 7.1% to settle at 13.70. The Street
witnessed another session of low volumes, as consolidated volumes
on the New York Stock Exchange, the American Stock Exchange and
Nasdaq were roughly 4.5 billion shares, sharply lower than last
year's daily average of 7.84 billion. The advancing stocks were
outnumbered by the decliners on the NYSE; as for 36% stocks that
gained, 60% stocks closed lower.
Incidentally, on a day when the benchmarks ended mostly in the
red, the VIX dropped to its lowest level in five years. Generally,
VIX moves in the opposite direction of the market and a drop in the
fear-gauge index reflects improving investors confidence. Thus,
certain market onlookers opined that investors were not
aggressively bothered about the negative situation. Another equity
strategist commented that investors were taking out 'some
Headline from the Asian territory was what bothering the markets
yesterday, once more. Investors' sentiment turned jittery following
the report that Japan's gross domestic product (GDP) rose a mere
0.3% in the second quarter of 2012. The annual growth decelerated
to 1.4%, sharply lower than estimates of 2.5%. About 60% of the
country's economy depends on the domestic consumption, which
dropped by 0.1% in the second quarter and was a reason behind the
slower GDP growth.
Additionally, the effect of the global headwinds is prevalent,
affecting Japanese economy. Masaaki Shirakawa, Governor of Bank of
Japan, commented: "Europe's sovereign debt woes are already having
a huge impact on the global economy… If the situation worsens
further, it could trigger market turmoil or further cool global
The dismal Japanese GDP data came soon after China reported
disappointing economic readings last week. Last week, China's
General Administration of Customs said both export and import
growth decelerated in China. Trade surplus slumped to $25.1 billion
in July from prior month's $31.7 billion. This report came just a
day after the nation reported factory output growth had sunk to its
lowest level in over three years.
Thus, combined with the recent negative news out of Asian
continent and the lingering European debt woes, investors were
reminded of the grim picture of the global economic condition.
However, flagging economic condition have also raised investors'
hopes for fresh economic measures, and they eagerly wait to see
what the U.S. Federal Reserve, the European central bank or the
Chinese central bank have to do with this regard.
Coming to the sectors, technology was the only gainer among the
10 industry groups in the S&P 500. The Technology SPDR (ETF)
(XLK) managed to end 0.3% higher. Google Inc (NASDAQ:
) was major gainer as it jumped 2.8% after announcing that it will
chop down Motorola Mobility's headcount by 20%. Among the other
tech stocks, Apple Inc. (NASDAQ:
), Western Digital Corp. (NASDAQ:
), Tellabs, Inc. (NASDAQ:
), Computer Sciences Corporation (NYSE:
) gained 1.3%, 0.8%, 0.9% and 0.3%, respectively.
APPLE INC (AAPL): Free Stock Analysis Report
COMP SCIENCE (CSC): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis
TELLABS INC (TLAB): Free Stock Analysis Report
WESTERN DIGITAL (WDC): Free Stock Analysis
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