Benchmarks ended in negative territory on Tuesday, as
investors cautiously awaited the outcome of the Federal Open
Market Committee meeting to gain further insights into the Fed's
next move. The two-day policy meet is expected to decide on the
future of the Fed's stimulus measures. The two-year budget deal
also sailed through a test vote in the Senate, indicating that it
may receive final approval later this week. The materials sector
was the only gainer among the S&P 500 industry groups while
financials incurred maximum loses.
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Ahead of Wall Street
The Dow Jones Industrial Average (DJI) lost about 0.1% to close
the day at 15,875.26. The S&P 500 declined 0.3% to finish
yesterday's trading session at 1,781. The tech-laden Nasdaq
Composite Index decreased 0.7% to end at 4,023.68. The fear-gauge
CBOE Volatility Index (VIX) rose 1.1% to settle at 16.21.
Consolidated volumes on the New York Stock Exchange, American
Stock Exchange and Nasdaq were roughly 5.9 billion shares.
Declining stocks outnumbered the advancers. For 52% shares that
declined, only 44% advanced.
The two-day policy meeting of the FOMC started yesterday. Some
market watchers are of the view that the Fed will indicate when
it will begin tapering its stimulus program at the end of this
meeting. Upbeat November nonfarm payrolls data, followed by last
Tuesday's bipartisan budget deal in Washington increased investor
expectations that this will occur soon.
Meanwhile, a two-year budget deal cleared a Senate procedural
vote yesterday. This indicated that the proposal will be passed
by a simple majority in the Democratic-controlled chamber later
in the week. Coming to voting numbers, the Senate voted in favor
of limiting debate and passing the measure by 67 votes against
33. The results also exceeded the minimum requirement of 60
votes. The results also clearly negated Republican objections to
higher short-term government spending.
Twelve of the Republicans joined fifty-three Democrats along with
two independents in support of the tentative two-year budget
deal. The deal is expected to make an automatic spending cut of
$60 billion and reduce deficit by as much as $23 billion. The
agreement aims at avoiding another government shutdown over
October 1, 2015, and also promises to end three years of
political conflicts and fiscal instability in Washington.
Soon after the Senate voting, prominent Senate Republican Mitch
McConnell indicated that signs of a debt limit battle were
imminent. He said: "I doubt if the House or for that matter the
Senate is willing to give the president a clean debt ceiling
increase". Senate Majority Leader Harry Reid said he "can't
imagine" that Republicans would clash once again over the debt
ceiling following the tedious struggle on the same issue which
resulted in a sixteen-day government shutdown.
According to the U.S. Department of Labor, the Consumer Price
Index (CPI) for the month of November remained unchanged. This
was in contrast to the consensus estimate of 0.1% increase. The
all items index rose 1.2% in the last twelve months. The index
for all items less food and energy increased 0.2%, higher than
the 1.0% increase over the twelve months till October. The food
index rose 1.2% over the past twelve months, while energy
The materials sector was the only gainer among the S&P 500
industry groups. The Materials SPDR (XLB) gained 0.7%. Stocks
such as Monsanto Company (NYSE:
), E I Du Pont De Nemours And Co (NYSE:
), The Dow Chemical Company (NYSE:
), Praxair, Inc. (NYSE:
), and Freeport-McMoRan Copper & Gold Inc. (NYSE:
) gained 1.3%, 0.6%, 1.4%, 0.2%, and 0.9%, respectively.
The financials sector incurred maximum loses among the S&P
500 industry groups. The Financials SPDR (XLF) lost 0.7%. Stocks
such as Wells Fargo & Co (NYSE:
), JPMorgan Chase & Co. (NYSE:
), Berkshire Hathaway Inc. (NYSE:BRK.B), Bank of America Corp
), and Citigroup Inc. (NYSE:
) decreased 0.9%, 1.2%, 0.3%, 0.4%, and 0.4%, respectively.