Benchmarks ended in the red following reports which showed that
the U.S. economy surprisingly shrunk in the fourth quarter.
Positive sentiments of investors were dampened after the Federal
Reserve stated that the economic growth was probably short-lived
and has grinded to a halt. The only gainer among the S&P 500
industry groups was the utilities sector while the industrial
sector emerged as the biggest loser.
The Dow Jones Industrial Average (DJI) lost 0.3% to close the
day at 13,910.42. The S&P 500 decreased 0.4% to finish
yesterday's trading session at 1,501.96. The tech-laden Nasdaq
Composite Index slipped 0.4% to end at 3,142.31. The fear-gauge
CBOE Volatility Index (VIX) jumped 7.6% to settle at 14.32.
Consolidated volumes on the New York Stock Exchange, American Stock
Exchange and Nasdaq were roughly 6.2 billion shares, lower than the
daily average of 6.45 billion shares in 2012. Declining stocks
outnumbered advancers on the NYSE; as for 62% stocks that fell, 35%
On Wednesday, the Street began its steady trading session on a
low after the U.S. Department of Commerce reported that the U.S.
economy contracted sharply in the fourth quarter. According to U.S.
Department of Commerce, the U.S. economy declined 0.1% annually in
the fourth quarter. This was contrary to the consensus estimate of
a rise of 1.2%. In the third quarter real GDP rose 3.1%. The
declining GDP in the fourth quarter is attributable to the adverse
effects of federal government spending, private inventory
management and exports.
The Federal Reserve said that in order to boost the economy the
central bank will keep on purchasing mortgage-backed securities
worth $40 billion a month along with long-term Treasury securities
worth $45 billion per month, totaling $85 billion a month. This
policy is intended to reduce unemployment and boost the economy.
The securities and long-term treasury purchased by the Central Bank
will continue to maintain short-term interest rate at near zero
levels till the U.S. unemployment rate drops below 6.5%.
Shares of online retail giant Amazon.com, Inc. (NASDAQ: AMZN ) surged 4.8%
after it registered strong earnings for the fourth quarter. Revenue
of the company rose 22% and the profit margin improved too. Shares
of the Boeing Company (NYSE: BA ) increased almost
1.3% after the company reported decent profits. The profits of the
company are attributable to increase in earnings from commercial
jets, which were diluted by lower profit from the defense
On an encouraging note, Automatic Data Processing's (NASDAQ: ADP ) National
Employment report revealed that the U.S. private sector added
192,000 jobs in January. The report also noted that small
businesses added 115,000 jobs whereas the medium added 79,000 more
jobs. But jobs in the large businesses declined by 2,000. Service
producing sector accounted for 177,000 more jobs whereas goods
producing sector added 15,000 jobs.
The utilities sector was the only gainer among the S&P 500
industry groups and the Utilities SPDR (XLU) edged up 0.1%. Stocks
such as NRG Energy Inc (NYSE: NRG ), Dominion
Resources, Inc. (NYSE: D ), Duke Energy Corp
(NYSE: DUK ),
Integrys Energy Group, Inc. (NYSE: TEG ) and Wisconsin
Energy Corporation (NYSE: WEC ) added 0.3%, 0.3%,
0.7%, 0.2% and 0.7%, respectively.
The industrials sector had a bad run and emerged as the biggest
loser among the S&P 500 industry groups. The Industrial Select
Sector SPDR (XLI) lost 0.9%. Stocks such as United Parcel Service,
Inc. (NYSE: UPS ),
3M Co (NYSE: MMM ),
Deere & Company (NYSE: DE ) and United
Technologies Corporation (NYSE: UTX ) decreased 1.2%,
1.0%, 0.1% and 0.7%, respectively.AMAZON.COM INC (AMZN): Free Stock Analysis
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