The Dow and S&P 500 extended their losing streak into a
fourth successive day as strong private sector labor data
intensified apprehensions that the Federal Reserve would soon
begin trimming its economic stimulus package. Stocks traded lower
for most of the session before make up for some losses ahead of
the closing bell. The prevailing mood of uncertainty meant that
there was little trading action as investors await key nonfarm
payroll data to be released on Friday. The materials sector was
the biggest gainer among the S&P 500 industry groups while
industrials lost the most.
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Ahead of Wall Street
The Dow Jones Industrial Average (DJI) lost about 0.2% to close
the day at 15889.77. The S&P 500 declined 0.1% to finish
yesterday's trading session at 1792.81. The tech-laden Nasdaq
Composite Index increased 0.02% to end at 4038.00. The fear-gauge
CBOE Volatility Index (VIX) rose 1.0% to settle at 14.70.
Consolidated volumes on the New York Stock Exchange, American
Stock Exchange and Nasdaq were roughly 6.3 billion shares.
Declining stocks outnumbered the advancers. For 60% shares that
declined, only 37% advanced.
Many market watchers were expecting the Federal Reserve to start
tapering its stimulus program by March next year. On the
contrary, the encouraging nature of recently released economic
reports has given rise to the view that tapering may happen
sooner rather than later.
Strong employment data from Automatic Data Processing, Inc.
) brought little cheer to the markets. Numbers were on the
brighter side with private sector job additions increasing beyond
200K for the first time in about 12 months. However, instead of
improving sentiment the report intensified apprehensions that the
central bank would reduce bond purchases sooner than expected.
According to the National Employment Report, the U.S. nonfarm
private sector employment added 215,000 jobs in November. This
was higher than the expected increase of 173,000 jobs. Small
business added 102,000 jobs, medium business added 48,000 jobs
and 65,000 additions were made by large business. November's
numbers come after two consecutive months of job gains of 185,000
Separately, the U.S. Census Bureau and the Department of Housing
and Urban Development reported that sales of single homes
increased to 444,000, up 25.4% from September's revised figure of
354,000. This was also above the consensus estimate of 425,000.
The ISM non-manufacturing index came in at 53.9% for November.
This is 1.5% lower than October's reading of 55.4%. This was also
below the consensus estimate of 55.8%. The Non-Manufacturing
Business Activity Index decreased to 55.5%, while the new orders
index decreased marginally, by 0.4%, to 56.4%. The Employment
Index also decreased 3.7% to 52.5%.
Separately, the Federal Reserve's Beige Book noted that the U.S.
economy continued to expand at a modest to moderate pace starting
from early October through the mid-November. Seven districts
reported moderate growth while four cities cited modest growth.
Expansion in manufacturing activity continued in most districts
due to gains in from motor-vehicles and high-technology sectors.
Additionally, demand for professional business services has
ranged from stable to moderate, primarily for computer
technologies. Retail spending reports were positive. Looking
ahead toward the holiday shopping season, retailers are hopeful
and cautious at the same time.
The materials sector was the biggest gainer among the S&P 500
industry groups on Wednesday. The Materials SPDR (XLB) gained
0.5%. Stocks such as Monsanto Company (NYSE:
), The Dow Chemical Company (NYSE:
), Freeport-McMoRan Copper & Gold Inc. (NYSE:
), PPG Industries, Inc. (NYSE:
), and Air Products & Chemicals, Inc. (NYSE:
) increased 0.5%, 0.4%, 0.9%, 0.7% and 0.3%, respectively.
The industrials sector was the biggest loser among the S&P
500 industry groups on Wednesday. The Industrials SPDR (XLI) lost
0.4%. Stocks such as United Technologies Corporation (NYSE:
), The Boeing Company (NYSE:
), 3M Co (NYSE:
), Union Pacific Corporation (NYSE:
), and United Parcel Service, Inc. (NYSE:
) decreased 0.7%, 0.4%, 0.1%, 0.7% and 0.2%, respectively.