Benchmarks entered negative territory following fears that the
bond purchase program will be rolled back next month. Weaker than
expected results from a major retail company added to investors'
woes. Meanwhile, the Euro Zone emerged from a long recession
after Germany and France posted better than expected Gross
Domestic Product (GDP) numbers. All the S&P 500 industry
groups ended in the red. Consumer Discretionary stocks suffered
For a look at the issues currently facing the markets, make
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Ahead of Wall Street
The Dow Jones Industrial Average (DJI) lost 0.7% to close the
day at 15,337.66. The S&P 500 dropped 0.5% to finish
yesterday's trading session at 1,685.39. The tech-laden Nasdaq
Composite Index slipped 0.5% to end at 3,669.27. The fear-gauge
CBOE Volatility Index (VIX) increased 5.9% to settle at 13.04.
Consolidated volumes on the New York Stock Exchange, American
Stock Exchange and Nasdaq were roughly 5.4 billion shares, well
below 2013's average of 6.36 billion shares. Declining stocks
outnumbered the advancers. For the 63% that declined, 34%
The $85 billion monthly bond purchase program has pushed
benchmarks to multiple highs in 2013. Since last month, various
Federal Reserve officials have been commenting on the fate of the
bond purchase program. However, no final decision has been taken
yet. Yesterday, all the benchmarks dropped by more than 0.5%
amidst speculation that the bond purchase program will be ended
by next month. In the last hour of yesterday's trading session,
benchmarks pared some losses. Benchmarks came off yesterday's
lows after the president of St. Louis Federal Reserve, James
Bullard, said the Central Bank should wait for further
improvement in economic indicators before ending the program. The
S&P 500 index has dropped 0.4% this week, but has increased
18% for the year.
On the home front, according to data released by the U.S.
Department of Labor, The Produce Price Index for July remained
unchanged for July, compared to the consensus estimate of an
increase of 0.3%. Among other items, prices of finished goods
increased 0.8% while price of crude goods rose 1.2%.
On the international front, Euro Zone has finally emerged from
recession on the back of better than expected GDP growth of
Germany and France. GDP of the Euro Zone region came in at
0.3% for the second quarter of 2013. The region has suffered from
a debt crisis for more than three years. Germany's GDP grew at
0.7% while GDP of France increased unexpectedly by 0.5%. GDP
growth in France is mainly attributable to an increase in
industrial output and consumer spending. Apart from these two
countries, significant growth was also witnessed in Portugal.
Portugal's GDP increased at 1.1%, primarily due to high
Shares of a major retailer Macy's, Inc. (NYSE:
) dropped 4.5% after it reported results below the Street's
estimates. Net income of the company came in at $281 million or
$0.72 a share, marginally higher than last year's net income of
$279 million or $0.67 a share. Net sales of the company came in
below estimates at $6.07 billion, down from last year's sales
figure of $6.12 billion and the Street's estimates of $6.26
billion. The company also lowered its yearly guidance of earnings
per share to $3.80 and $3.90 per share.
Consumer discretionary stocks were the biggest losers among
the top ten S&P 500 industry groups. The Consumer
Discretionary SPDR (XLY) dropped 1.1%. Stocks such as Verizon
Communications Inc. (NYSE:
), CBS Corporation (NYSE:
), Time Warner Inc (NYSE:
), Comcast Corporation (NASDAQ:
) and Time Warner Cable Inc (NYSE:
) dropped 0.5%, 1.2%, 1.2%, 2.2% and 0.9%, respectively.
CBS CORP (CBS): Free Stock Analysis Report
COMCAST CORP A (CMCSA): Free Stock Analysis
MACYS INC (M): Free Stock Analysis Report
TIME WARNER CAB (TWC): Free Stock Analysis
TIME WARNER INC (TWX): Free Stock Analysis
VERIZON COMM (VZ): Free Stock Analysis Report
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