Benchmarks were battered on Wednesday after Bernanke said the
Central Bank might cut back on the $85 billion bond purchase
program towards the end of the year, if the economy improved. In
spite of the free fall in stocks during yesterday's trading
session, a couple of companies managed to chalk up gains
following better than expected results. All the top ten S&P
500 industry groups suffered losses among which utilities stocks
suffered the most.
The Dow Jones Industrial Average (DJI) lost 1.3% to close the
day at 15,112.27. The S&P 500 declined 1.4% to finish
yesterday's trading session at 1,628.92. The tech-laden Nasdaq
Composite Index fell 1.1% to end at 3,443.20. The fear-gauge CBOE
Volatility Index (VIX) gained 0.2% to settle at 16.64.
Consolidated volumes on the New York Stock Exchange, American
Stock Exchange and Nasdaq were roughly 6.65 billion shares,
higher than 2013's average of 6.36 billion shares. Declining
stocks outnumbered the advancers. For the 16% that advanced, 82%
Benchmarks had increased to a record level until May 21,
boosted by the bond purchase program and robust economic data.
But following Bernanke's testimony on May 22, the Dow Jones has
oscillated within the range of 200 points more than fifteen
times. The S&P 500 is currently trading 2.4% below its
all-time high attained on May 21. Initially the Fed had said
there would be no changes in the bond buying program. But
Bernanke's statements emerged as singular dampener during
yesterday's trading session. The Fed chairman said the bond
purchase program would be reduced during the end of the year with
the intention of completely ending it by mid-2014. These
statements drastically effected investor sentiment after which
markets went into a free fall.
Bernanke said: "If the incoming data are broadly Consistent
with this forecast, the Committee currently anticipates that it
would be appropriate to moderate the monthly pace of purchases
later this year; and if the subsequent data remain broadly
aligned with our current expectations of our economy, we would
continue to reduce the pace of purchases in measured steps
through the first half of next year, ending purchases around
He added that the Fed expected the inflation rate would be 2%
and the unemployment rate will be around 7% by that time.
Currently, the unemployment rate is 7.6% and the inflation rate
is hovering around 1.4%. The committee expected Gross Domestic
Product for 2014 to grow at 3.4% from the previously stated
Shares of SPDR S&P Homebuilders (XHB) lost 2.3% after
witnessing a good run yesterday due to an increase in homebuilder
sentiment. Shares of Toll Brothers Inc (NYSE:
), KB Home (NYSE:
), D.R. Horton, Inc. (NYSE:
), The Ryland Group, Inc. (NYSE:
) and PulteGroup, Inc. (NYSE:
) lost 2.6%, 3.8%, 3.9%, 4.3% and 3.4%, respectively.
On the earnings front, shares of Adobe Systems Incorporated
) gained 5.6% after it posted quarterly profits higher than the
Street's expectations. Profits of the company increased on the
back of higher subscriptions for Creative Cloud and a growth in
bookings of over 25%. Shares of FedEx Corporation (NYSE:
) gained 1.1% after it posted better quarterly results on the
back of an improving ground shipment business.
The utilities sector was the biggest loser among the S&P
500 industry groups and the Utilities SPDR (XLU) lost 2.3%.
Stocks such as Duke Energy Corp (NYSE:
), The Southern Company (NYSE:
), Dominion Resources, Inc. (NYSE:
), NextEra Energy, Inc. (NYSE:
) and Exelon Corporation (NYSE:
) lost 2.2%, 2.6%, 2.2%, 1.7% and 1.5%, respectively.
ADOBE SYSTEMS (ADBE): Free Stock Analysis
DOMINION RES VA (D): Free Stock Analysis
D R HORTON INC (DHI): Free Stock Analysis
DUKE ENERGY CP (DUK): Free Stock Analysis
EXELON CORP (EXC): Free Stock Analysis Report
FEDEX CORP (FDX): Free Stock Analysis Report
KB HOME (KBH): Free Stock Analysis Report
NEXTERA ENERGY (NEE): Free Stock Analysis
PULTE GROUP ONC (PHM): Free Stock Analysis
RYLAND GRP INC (RYL): Free Stock Analysis
SOUTHERN CO (SO): Free Stock Analysis Report
TOLL BROTHERS (TOL): Free Stock Analysis
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