Markets ended modestly lower yesterday after the central bank
announced no new economic measures. Separately, a trading glitch
saw over 140 NYSE stocks swinging sharply with unusually high
volumes in the first-hour of trading. Economic readings were a
mixed bag yesterday with labor market data coming in positive while
the U.S. manufacturing sector dropped for the second consecutive
time. For now, the concentration will shift to the European Central
Bank's meeting, before nonfarm payroll data is released on
The Dow Jones Industrial Average (DJI) dropped 0.3% and closed
at 12,971.06. The Standard & Poor 500 (S&P 500) edged down
0.3% and finished yesterday's trading session at 1,375.32. The
tech-laden Nasdaq Composite Index closed at 2,920.21, after falling
0.7%. The fear-gauge CBOE Volatility Index (VIX) added a mere 0.2%
to settle almost unchanged at 18.96. Total volumes on the New York
Stock Exchange soared to roughly 4.3 billion shares, well above the
average. Advancers were outnumbered by declining stocks on the
NYSE; as for 36% stocks that gained, 59% stocks closed lower.
During the initial hour, volumes of over 140 companies moved to
an unusually high level and stock prices swung with high
volatility. This was identified as a technological glitch at Knight
Capital Group, Inc.'s (NYSE:
) market-making unit. The electronic trading firm said the
"technology issue" had impacted the routing of shares to the NYSE
and urged clients to transfer 'NYSE-listed orders' elsewhere.
Shares of Knight Capital slumped 32.8%.
NYSE later identified around 150 stocks after its investigation
into "irregular trading". Some said the incident brought back
tmemories of the 'Flash Crash' of 2010. Prominent among the
identified companies was Citigroup, Inc. (NYSE:
). NYSE later cancelled the trading of 6 of those stocks. Among
them were Wizzard Software Corporation (NYSE MKT:WZE), Quicksilver
Resources Inc (NYSE:
), China Cord Blood Corp (NYSE:
), American Reprographics Company (NYSE:
) and E-House (China) Holdings Limited (ADR) (NYSE:
While markets wavered between gains and losses, the benchmarks
moved lower for the rest of the session following the release of
the FOMC's statement. Investors were awaiting the outcome of the
Federal Reserve Open Market Committee's meeting, slated to conclude
yesterday with hopes of the announcement of a third buyback plan.
However, no such announcement was made even though the FOMC said it
would keep interest rates low through 2014. Operation Twist will
continue till the year end.
Investors' hopes for a third round of quantitative easing (QE3)
have been gaining strength. But they met with a disappointment yet
again, reflecting the trend since the second bond buyback plan
concluded. These hopes were rekindled following a bagful of dismal
economic readings over the past several weeks. Moreover, Federal
Reserve Chairman Ben Bernanke had acknowledged the "frustratingly
slow" pace of improvement in unemployment in his congressional
testimony last month.
However, the central bank did not altogether shut the door on
further stimulus measures. According to the statement: "The
Committee will closely monitor incoming information on economic and
financial developments and will provide additional accommodation as
needed." Also, the central bank noted that the US economy has
"decelerated somewhat", which was a turnaround from its statement
in June that the economy was "expanding modestly".
Overall, economy, economic readings yesterday were a mixed bag.
The National Employment Report by Automatic Data Processing (NYSE:
) stated that 163,000 jobs were added to the U.S. nonfarm private
business sector in July. Coming to the details, "Employment in the
private, service-providing sector expanded 148,000 in July after
rising a revised 151,000 in June. The private, goods-producing
sector added 15,000 jobs in July. Manufacturing employment rose
6,000 this month, following a revised increase of 9,000 in
Meanwhile, Institute for Supply Management said economic
activity of the manufacturing sector contracted in July; the
second-consecutive month of decline since July 2009.
According to the Institute for Supply Management Manufacturing
Business Survey Committee: "The PMI registered 49.8 percent, an
increase of 0.1 percentage point from June's reading of 49.7
percent, indicating contraction in the manufacturing sector for the
second consecutive month, following 34 consecutive months of
expansion". Consensus estimates were eyeing a reading of 50.2.
While the last two trading sessions before Wednesday's session
struggled to provide cheer in the absence of major headlines,
yesterday there was sufficient news for the market. Moreover, there
will be kept even busier over the next two days. Eyes are now on
the ECB meeting, the importance of which increased following ECB
President Mario Draghi's comments last week to do "whatever it
takes" to keep the Euro-zone intact. Mario Draghi's vow will now be
put to the test at the ECB meeting as investors await concrete
action or at least a plan. Thereafter, the government is due to
report nonfarm payroll data on Friday.
AMER REPROGRAPH (ARC): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
CHINA CORD BLD (CO): Free Stock Analysis Report
E-HOUSE CHINA (EJ): Free Stock Analysis Report
KNIGHT CAP GP (KCG): Free Stock Analysis Report
QUICKSILVER RES (KWK): Free Stock Analysis
(WZE): ETF Research Reports
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