Favorable service sector data failed to add enough strength to
the benchmarks yesterday as they suffered another round of
losses. A choppy session saw the benchmarks open lower, followed
by S&P 500 and Dow's momentary halts in the green zone, after
ultimately closing in the red. Separately, private employers were
reported to have added lesser jobs than expected.
The Dow Jones Industrial Average (DJI) dropped a meager 0.03% to
close yesterday's session at 15,440.23. The Standard & Poor
500 was down 0.2% to finish at 1,751.64. The tech-laden Nasdaq
Composite Index finished at 4,011.55, down 0.5%. The fear-gauge
CBOE Volatility Index (VIX) rose 4.4% to settle at 19.95. About
6.6 billion shares changed hands on the US exchanges, lower than
January's average of 6.94 billion. Decliners outran the advancers
on the New York Stock Exchange as for 56% decliners, 40% stocks
finished in the green.
It was a choppy session for the benchmarks as they had opened
sharply lower before overcoming a large chunk of losses. The
S&P 500 had dropped to a session low of 1,737.92, its lowest
level since Oct 18. The Dow too wiped out its earlier losses to
turn positive for a while, but the blue-chip index failed to hold
on to those gains till the closing bell. The choppy session was
largely a result of mixed economic reports. This set of reports
was closely awaited after the markets were routed on Monday
following dismal domestic manufacturing data.
Coming to the reports, the Institute for Supply Management
reported that economic activity in non-manufacturing sector
improved in January with business activity and new orders index
also showing an uptrend. The Institute for Supply Management
Non-Manufacturing Business Survey Committee noted that the NMI
improved 1 percentage point on monthly basis to 54% in January.
This also beat the consensus estimate of an increase to 53.6.
Also, Non-Manufacturing Business Activity Index was up 2
percentage points to 56.3% and the New Orders Index added 0.5
percentage point from December to move to 50.9% in January.
This data added some bullishness to the markets before fewer than
expected private sector job additions offset these gains. The
national employment report from Automatic Data Processing, Inc.
) stated 175, 000 private jobs were added in January, lower than
expectations of 189,000 job additions. Also, December's reading
was revised downwards, from 238,000 to 227, 000. January's
lesser-than-expected job additions were also the weakest since
last August. This marks the third straight month of drop in job
additions, as 289,000 jobs were added in November, followed by
227,000 in December and 175,000 in January.
The negative tone of the reports is particularly significant
since ISM had reported dismal domestic manufacturing data on
Monday that hammered benchmarks. According to the ISM, January
PMI has dropped 5.2 percentage points from December's adjusted
reading of 56.5% to 51.2%. The drop to 52.1% in January was in
sharp contrast to economists' expectation of an increase to
Benchmarks were hammered on Monday following the discouraging
data and the blue-chip index had suffered its seventh
triple-digit loss of the year. The indices suffered their worst
declines since June last year that dragged them below key
technical levels. The Dow closed below its 200-day moving after
losing 326 points, while S&P 500 and Nasdaq also lost
Benchmarks' fall on Wednesday only added to the negative run and
Tuesday's gains could hardly erode the losses. As of now, indices
are staring at weekly losses. The Dow, S&P 500 and the Nasdaq
are down 1.7%, 1.7% and 2.3%, respectively, so far.
Coming back to Wednesday's events, Ralph Lauren Corporation
) said earnings for the third quarter of fiscal 2014 had surged
11.3% year over year to $2.57 per share. The profits were also
ahead of the Zacks Consensus Estimate of $2.51. Despite
encouraging profits, shares of this retailer dropped 3.6%.
Separately, Gilead Sciences Inc. (NASDAQ:
) was a big drag on the S&P 500 as it lost 4.72%. The decline
came a day after reporting favorable fourth quarter results.
Earnings in the quarter were 52 cents ahead of the Zacks
Consensus Estimate of 49 cents and improved 8.3% year over year.
Revenues were up 21% from last year's comparable quarter to $3.1
Among the sectors, utilities sector was a big decliner. The
Utilities Select Sector SPDR (XLU) lost 0.4% and stocks such as
Duke Energy Corporation (NYSE:
) (0.5%), Dominion Resources, Inc. (NYSE:
), NextEra Energy, Inc. (NYSE:
), Southern Company (NYSE:
) and Exelon Corporation (NYSE:
) declined 0.5%, 0.2%, 0.9%, 0.4% and 0.2%, respectively.
AUTOMATIC DATA (ADP): Free Stock Analysis
DOMINION RES VA (D): Free Stock Analysis
DUKE ENERGY CP (DUK): Free Stock Analysis
EXELON CORP (EXC): Free Stock Analysis Report
GILEAD SCIENCES (GILD): Free Stock Analysis
NEXTERA ENERGY (NEE): Free Stock Analysis
RALPH LAUREN CP (RL): Free Stock Analysis
SOUTHERN CO (SO): Free Stock Analysis Report
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