Domestic reports hinting at a slowing economy coupled with weak
data from Spain dampened sentiment to end the markets' four-day
winning streak. Nonetheless, the Dow still managed a seat in the
positive zone for April, but the S&P 500 suffered its first
monthly fall since November last year.
The Dow Jones Industrial Average (DJI) dropped 0.1% to settle at
13,213.63. The Standard & Poor 500 (S&P 500) slipped 0.4%
and finished yesterday's trading session at 1,397.91. The
tech-laden Nasdaq Composite Index was down to 3,046.36, dropping
0.7%. The fear-gauge CBOE Volatility Index (VIX) jumped 5.1% to
settle at 17.15. Consolidated volumes on the New York Stock
Exchange, American Stock Exchange and Nasdaq were 6.1 billion
shares, well below this year's daily average of 6.8 billion shares.
Decliners outdid the advancing stocks, as for every two stocks that
gained on the NYSE, around three stocks ended in the negative
territory.
It was the final trading session of the month which ultimately
determined whether the Dow could end in the green for that period.
The Dow finally gained 1.5 points for the month and upped its count
of consecutive monthly gains to seven. While the Dow enjoyed its
longest winning streak in five months, the S&P 500 hand
reversed its four-month winning streak to end in the negative zone
in April, dropping 0.8%. However, this increase of 0.8% is still a
turnaround from the 4.0% slump it had suffered earlier during the
month. The tech-laden Nasdaq too ended in the red zone, dropping
1.5% for the month.
The Dow's green finish was facilitated by the gains made over
the past four trading days. The four-day winning streak had also
helped the S&P 500 and Nasdaq to limit their losses. Corporate
earnings have played a huge role over these past sessions, aided by
an encouraging housing report. Moreover, comments from Federal
Reserve Chairman Ben Bernanke that the central bank "would not
hesitate" to bolster the economy if needed, also lifted the broader
sentiment.
However, things took a turn for worse yesterday, following
discouraging domestic economic data and a disappointing report from
Spain. The country's National Statistics Institute confirmed that
Spain's economy had contracted 0.4% in the first quarter. This puts
back the company into a recession since the 0.4% contraction
follows a 0.3% fall in the last quarter of 2011. Technically, two
back-to-back quarters of contraction signal a recession, which
further adds to Europe's woes. Spain seems to be in trouble almost
continuously, as this report comes only a day after Standard &
poor's downgraded its debt rating. The nation had also been
fighting against surmounting borrowing costs.
Coming to the domestic front, The Institute for Supply
Management-Chicago's business barometer dropped to 56.2 in April
from 62.2 in March. This was also significantly below consensus
estimates of 60.6. A reading above 50 indicates an expansion of the
manufacturing sector. But such a significant drop confirms a
slowing pace and the rate of decline was also more than expected.
U.S. Midwest business activity dropped to its lowest level since
November 2009, which was even more reason to worry.
Separately, the Federal Reserve Bank of Dallas' Texas stated
that business activity in April dropped to -3.4 from 10.8 in March.
This suggests a contraction in business activity, further sparking
off economic fears. Also, the manufacturing production index was
reported to have declined to 5.6 in April, down from 11.1 in March.
On the other hand, the Bureau of Economic Analysis reported that
disposable personal income (DPI) gained 0.4% in March and personal
consumption expenditures (
PCE
) was up 0.3%.
The financial sector was one of the sufferers yesterday with the
Financial Select Sector SPDR (
XLF
) declining 0.5% and the KBW Bank Index (BKX) dropping 1.2%. Among
the financial stocks, JPMorgan Chase & Co. (NYSE:
JPM
), Bank of America Corporation (NYSE:
BAC
), Citigroup, Inc. (NYSE:
C
), Wells Fargo & Company (NYSE:
WFC
) and U.S. Bancorp (NYSE:
USB
) slumped 0.8%, 1.7%, 1.4%, 1.1% and 0.8%, respectively.
BANK OF AMER CP (
BAC
): Free Stock Analysis Report
CITIGROUP INC (
C
): Free Stock Analysis Report
JPMORGAN CHASE (
JPM
): Free Stock Analysis Report
US BANCORP (USB): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis
Report
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