Benchmarks ended Thursday's trading session in the red following
St. Louis Fed president James Bullard's comments on a rate-hike.
Bullard expects the key interest rate hike to take place sooner
than anticipated. The blue-chip index had dropped as much as 119
points, before trimming losses in the post noon session. Economic
data on personal consumption expenditure was weaker-than-expected.
However, personal income and claims for unemployment benefits were
in line with expectations.
For a look at the issues currently facing the markets, make sure to
Ahead of Wall Street
The Dow Jones Industrial Average (DJI) declined 0.1% to close
Thursday's trading session at 16,846.13. The Standard & Poor
500 (S&P 500) too dropped 0.1% to finish at 1,957.22. The
tech-laden Nasdaq Composite Index dropped a meager 0.02% to
4,379.05. The fear-gauge CBOE Volatility Index (VIX) went up almost
0.4% to settle at 11.63. Total volume for the day was roughly 5.1
billion shares, lower than this month's average of 5.6 billion.
Advancers outpaced declining stocks on the NYSE. For 51% stocks
that advanced, 46% declined.
Benchmarks dropped on Thursday following comments from the
president of the Federal Reserve Bank of St. Louis, James Bullard.
He believes the central bank may hike interest rates by early 2015.
He mentioned that a rise in interest rates may happen sooner than
expected as unemployment rate falls and inflation increases at a
faster pace. The Federal Reserve official believes U.S jobless rate
will fall below 6% and inflation is likely to hit its 2% target
later this year.
In an interview with Fox Business Network, Bullard said: "You are
basically going to be near normal on both dimensions basically
later this year". He added: "That's shocking, and I don't think
markets, and I'm not sure policymakers, have really digested that
that's where we are". "The Fed is closer to its goal than many
people appreciate," Bullard said. Bullard is currently a non-voting
member of the Federal Open Markets Committee (FOMC).
Earlier this month, the Federal Reserve kept its monetary policy
"highly accommodative" and suggested there would be no immediate
rate hikes. The FOMC had decided during its two-day policy meeting
that it was committed to keeping interest rates low. Reportedly,
the Fed expects interest rates at the end of 2015 to approach
1.25%. The longer term rate forecast is now down to 3.75% from
Federal Reserve Chairwoman Janet Yellen had also stated that the
central bank will monitor a "wide range of indicators" on the labor
market for deciding to hike rates. She added there "is no
mechanical formula" to help Fed decide on raising the rates.
Economic data was largely discouraging on Thursday. According to
the Bureau of Economic Analysis, personal consumption expenditure
increased 0.2% in May. However, the consensus estimate had
projected an increase by 0.4%. Rise in sale of new autos was cited
to be the reason behind the increase in consumer spending last
Personal income also increased 0.4% in May. This was in line with
the consensus expectation and was more than the rate of growth in
April. Personal income rose by 0.3% in April. Disposable personal
income (DPI) too increased 0.4% in May, in line with the increase
Separately, the U.S Department of Labor reported that seasonally
adjusted initial claims decreased 2,000 to 312,000 during the week
ending June 21. The number of applications for unemployment
benefits during the week remained near a post-recession low. The
previous week's level was revised up by 2,000 to 314,000.
Meanwhile, the financial sector took a beating after New York
State's attorney general Eric T. Schneiderman filed civil fraud
charges against Barclays PLC (NYSE:
). He accused Barclays of giving an unfair advantage in the United
States to high-frequency trading clients on its private trading
platform. This is better known as the dark pool. Shares of the
British bank plunged 7.4%.
Key stocks from the financial sector such as Wells Fargo &
), JPMorgan Chase & Co. (NYSE:
), Bank of America Corporation (NYSE:
) and Citigroup Inc. (NYSE:
) dropped 0.4%, 0.2%, 0.4% and 1.2%, respectively. Overall, the
Financial Select Sector SPDR (XLF) declined almost 0.4%.
Home goods retailer Bed Bath & Beyond Inc. (NASDAQ:
) declined the most among the S&P 500 components. Shares of the
retailer plummeted 7.2% a day after the company reported dismal
first-quarter earnings report and a second-quarter earnings outlook
that was below analysts' expectations. Bed Bath & Beyond posted
earnings per share of 93 cents for the fiscal first quarter, less
than the Zacks Consensus Estimate of 95 cents per share. Further,
the retailer forecasted second quarter earnings per share at
$1.08-$1.16, less than analysts' expectations of $1.20 a share.
Six out of 10 sectors of the S&P 500 ended in the red. The
Consumer Staples Select Sector SPDR (NYSE:
) declined 0.4%, the highest among the S&P 500 sectors. Major
stocks from the sector such as The Procter & Gamble Company
), Philip Morris International, Inc. (NYSE:
), Wal-Mart Stores Inc. (NYSE:
) and Altria Group Inc. (NYSE:
) decreased 0.9%, 2.7%, 0.9%, and 0.3%, respectively.
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