Encouraging consumer spending data and strong sales figures from
major retailers failed to avoid benchmarks' fall yesterday as
investors remained cautious ahead of Ben Bernanke's speech. The
S&P 500 settled below the 1, 400 level for the first time since
August 6. Also, none of the industry groups in S&P settled in
the green. The financial sector was heavily battered as investors
preferred to offload their positions ahead of Bernanke's
speech.
The Dow Jones Industrial Average (DJI) slumped 106.77 points or
0.8% to close at 13,000.71. The Standard & Poor 500
(S&P500) also dropped 0.8%to finish yesterday's trading session
at 1,399.48. The tech-laden Nasdaq Composite Index was down 1.1%
and ended at 3,048.71. The fear-gauge CBOE Volatility Index (VIX)
added 4.5% and settled at 17.83. Volumes continued to be among the
lowest for the year and it was a mere 2.8 billion shares on the New
York Stock Exchange. The average consolidated volumes for the week
till Thursday is at 4.49 billion shares on the New York Stock
Exchange, Nasdaq and American Stock Exchange; the lowest levels for
2012 so far. The declining stocks far outpaced the advancing ones;
as for 68% stocks that declined, only 28% stocks closed higher.
As for the economic readings, the real consumer spending
expanded in July, rebounding from a contraction in June. The Bureau
of Economic Analysis reported that Personal consumption
expenditures (PCE) rose 0.4% or $46.1 billion. The real PCE was up
0.4% as against a decline of 0.1% in June. The report also noted
that the personal income increased 0.3% and disposable personal
income (DPI) added 0.3% in July.
Separately, retailers including Target Corp. (NYSE:
TGT
), Macy's, Inc. (NYSE:
M
), Gap Inc. (NYSE:
GPS
) and Nordstrom Inc. (NYSE:
JWN
) reported encouraging August sales numbers. This combined with the
positive consumer expenditure data should have been encouraging
headlines for the benchmarks to have finished in the green.
However, that was not the case yesterday as a cautious stance
coupled with no drop in initial claims and discouraging signs from
international frontiers dragged benchmarks to the negative
zone.
As for the international jitters, Greek Prime Minister Antonis
Samaras pressed on the need of the austerity measures in 2013-2014.
He did mention that the "cutbacks are difficult, painful," and
added, ""But they are also inevitable. For without them the country
would return to zero credibility and effectively leave the euro.
Which would...destroy the country". However, he also
mentioned that this cutback would be the last major austerity
measure. Separately, German Chancellor Angela Merkel's talks with
Chinese Premier Wen Jiabao failed to assure him about the European
region, as Wen Jiabao urged that the embattled European nations
must pick up austerity measures.
Coming back to the domestic front, the U.S. Department of Labor
reported that the seasonally adjusted initial claims in the week
ending August 25 remained flat with the previous week at 374,000.
It was also somewhat weaker than the consensus estimates of
373,000.
While the these negatives weighed on investor sentiment, they
also remained on the edges as the investors are apprehensive about
what Federal Reserve Chairman have to divulge regarding the need of
another economic stimulus. The Federal Reserve's annual meeting is
scheduled at Jackson Hole on Friday. Through the week, investors
remained cautious and refrained from betting big bucks. While some
investors have been optimistic about a definite clue regarding the
third quantitative easing, there have been strategists who opined
otherwise. Very recently, economic data have been on the brighter
side, including positive housing figures and GDP data showing
slight advance in the second estimate from the initial
estimate.
Thus, with the apprehensions alive, investors chose to sell
their shares and the financial sector also bore the brunt. The
Financial Select Sector SPDR (ETF) dropped 0.5% and stocks
including Citigroup Inc. (NYSE:
C
), JPMorgan Chase & Co. (NYSE:
JPM
), U.S. Bancorp (NYSE:
USB
), Goldman Sachs Group, Inc. (NYSE:
GS
) and Wells Fargo & Company (NYSE:
WFC
) dropped 0.9%, 1.1%, 0.6%, 0.8% and 0.6%, respectively.
CITIGROUP INC (C): Free Stock Analysis Report
GAP INC (GPS): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis
Report
NORDSTROM INC (JWN): Free Stock Analysis Report
MACYS INC (M): Free Stock Analysis Report
TARGET CORP (TGT): Free Stock Analysis Report
US BANCORP (USB): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis
Report
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