Benchmarks retreated from record highs on Wednesday dragged down
by declines in small-cap and Internet stocks. Also, selloffs in the
consumer discretionary sector had a negative impact on benchmarks.
The day's economic reports were limited to U.S. wholesale prices,
which reported an increase by 0.6% in April. Meanwhile, investors
were focused on recent developments in Ukraine where pro-Russian
rebels and Ukrainian forces are in constant confrontation.
For a look at the issues currently facing the markets, make sure to
Ahead of Wall Street
The Dow Jones Industrial Average (DJI) dropped 0.6% to close
Wednesday's trading session at 16,613.97. The Standard & Poor
500 (S&P 500) declined 0.5% to finish at 1,888.53. The
tech-laden Nasdaq Composite Index dropped 0.7% to 4,100.63. The
fear-gauge CBOE Volatility Index (VIX) went up 0.3% to settle at
12.17. Total volume for the day was roughly 5.3 billion shares,
lower than this month's average of 6.1 billion. Decliners outpaced
advancing stocks on the NYSE. For 60% stocks that declined,
Benchmarks ended in negative territory primarily due to decline in
small-cap stocks. The Russell 2000 Index of small-caps registered
its second successive decline after the index dropped 1.6% on
Wednesday. On Tuesday, the small-cap index had declined 1.1%. The
Russell 2000 has now moved below its 200-day moving average and is
down over 9% from its intraday record high achieved on March 4.
Selling pressure in Internet stocks also dragged down benchmarks.
Internet stocks from the Technology sector such as Facebook, Inc.
), Google Inc. (NASDAQ:
), Groupon, Inc. (NASDAQ:
), Yelp, Inc. (NYSE:
), LinkedIn Corporation (NYSE:
), Yahoo! Inc. (NASDAQ:
) and Twitter, Inc. (NYSE:
) decreased 1.0%, 1.2%, 4.4%, 1.7%, 1.4%, 0.7% and 1.6%,
Consumer discretionary sector too weighed on the broader markets
yesterday. The Consumer Discret Select Sector SPDR (XLY) lost 1.1%.
Much of the decline was due to a 10.3% decline in Fossil Group,
) after the company forecasted dismal fiscal second quarter
results. Fossil Group also led the decline in the S&P 500.
Key stocks from the Consumer discretionary sector such as Comcast
), The Walt Disney Company (NYSE:
), The Home Depot, Inc. (NYSE:
), McDonald's Corp. (NYSE:
) and Ford Motor Co. (NYSE:
) decreased 0.6%, 1.4%, 1.2%, 0.5% and 0.7%, respectively.
Separately, International Business Machines Corporation (NYSE:
) was a big drag on the Dow and the S&P 500. Shares of the
blue-chip company dropped 1.8% after the company failed to convince
investors that a turnaround of its hardware business would be
succesfull. IBM expects its hardware sector to improve in 2015. In
the first quarter of 2014, IBM had reported a 23% plunge in
systems-and-technology unit, which includes the hardware business.
Coming to economic data, the U.S. Bureau of Labor Statistics
reported that the seasonally adjusted Producer Price Index (PPI)
for finished goods increased 0.6% in April, beating consensus
estimate of a 0.2% gain. This was the largest gain since the fall
of 2012. Rise in price of food, energy and an increase in cost of
doing business in the service sector were cited to be the reasons
behind the increase in U.S. wholesale costs.
Meanwhile, investors kept an eye on the latest developments in
Ukraine. On Tuesday, pro-Russian rebels ambushed Ukrainian troops.
They killed seven government soldiers and injured eight others near
the eastern Ukrainian town of Kramatorsk. This was the heaviest
loss that the government forces have suffered in a single conflict.
Six out of 10 sectors of the S&P 500 ended in the red. The SPDR
S&P Homebuilders ETF (XHB) led the decline among the S&P
500 sectors. The sector dropped 2.2%. Key housing stocks such as
PulteGroup, Inc. (NYSE:
), Lennar Corp. (NYSE:
), DR Horton Inc. (NYSE:
) and Beazer Homes USA Inc. (NYSE:
) decreased 1.9%, 2.9%, 4.1% and 0.9%, respectively.
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