The Dow and S&P 500 extended their losses into a
fifth-straight day and the Nasdaq also took a hammering, as
discouraging domestic economic data added to the woes of lingering
Greek concerns. The mid-Atlantic region witnessed its first drop in
manufacturing activity in eight months and the outlook for US
economic growth showed a declining trend for the first time in six
months. With these concerns sinking the benchmarks, the Dow
suffered its 11th decline in the past 12 sessions and ended at its
lowest level since January this year.
The Dow Jones Industrial Average (DJI) dropped 1.2% and ended
significantly lower at 12,442.49. The Standard & Poor 500
(S&P 500) slumped 1.5% to finish yesterday's trading session at
1,304.86. The tech-laden Nasdaq Composite Index crashed 2.1% and
closed at 2,813.69. The fear-gauge CBOE Volatility Index (VIX) shot
up almost 10% to settle at 24.49. Consolidated volumes on the New
York Stock Exchange, American Stock Exchange and Nasdaq were
roughly 8.35 billion shares, sharply higher than the daily average
of 6.81 billion. Decliners drubbed the advancing stocks on the
NYSE; as for 84% of the decliners, only 13% stocks could move
higher. The remaining stocks were left unchanged.
European political uncertainty has taken a toll on global as
well as US benchmarks. France has a new government in place and
Greece is yet to finalize on one. Germany's Angela Merkel too has
lost a poll recently, which she termed as a "bitter, painful
defeat". All through this week Greek concerns have dampened
sentiment overshadowing positives such as encouraging economic
The concerns which have dominated the week are clearly reflected
in the performance of benchmarks. So far this week, the Dow,
S&P 500 and Nasdaq are down 3.0%, 3.6%, and 4.1%, respectively.
Additionally, this was the second near 10% jump for the VIX this
week. On Monday, the VIX had jumped precisely 9.95% and has
followed it up with an uptrend since then. Yesterday it jumped
9.97% and subsequently the VIX hit its highest level since late
December last year.
Amidst ongoing Greek concerns, economic readings have been the
only saving grace, though they have failed to rescue markets from
their consistent slump. However, yesterday even economic readings
were a big disappointment and that ensured a heavy fall for the
benchmarks. The Philadelphia Federal Reserve's business conditions
index showed a declining trend and was at its lowest level since
September last year. The Business Outlook Survey for the month of
May noted: The survey's broad indicators for general activity fell
into negative territory for the first time in eight months.
Indicators for new orders and employment also suggested slight
declines from April". According to the report, the 'measure of
manufacturing conditions, the diffusion index of current activity,'
was down to ‐5.8 in May from a positive 8.5 in April. This was also
contrary to consensus estimates of a reading of 9.4.
Separately, The Conference Board Leading Economic Index
contracted 0.1% last month to 95.5. This was the first
decline in six months. In March it had rose 0.3% and had registered
a 0.7% increase in February. The 0.1% fall was in absolute contrast
to the 0.1% uptrend predicted by consensus estimates. Ken
Goldstein, economist at The Conference Board, said "The indicators
reflect an economy that's still struggling to gain momentum. Growth
is slow, but choppy, and consumers, executives and investors are
looking for more progress".
Meanwhile, first-time claims for unemployment benefits remained
unchanged over last week. The U.S. Department of Labor reported:
"In the week ending May 12, the advance figure for seasonally
adjusted initial claims was 370,000, unchanged from the previous
week's revised figure of 370,000". Consensus estimates had expected
initial claims to be around 367, 000.
As for the sectors, the Technology Select Sector SPDR (XLK)
slumped 1.5%. Among the tech stocks, Apple Inc. (NASDAQ:
), SanDisk Corporation (NASDAQ:
), Seagate Technology PLC (NASDAQ:
), Google Inc (NASDAQ:
), Yahoo! Inc. (NASDAQ:
), and Oracle Corporation (NASDAQ:
) plunged 2.9%, 3.3%, 5.2%, 0.9%, 2.7% and 1.8%, respectively.
APPLE INC (AAPL): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis
ORACLE CORP (ORCL): Free Stock Analysis Report
SANDISK CORP (SNDK): Free Stock Analysis Report
SEAGATE TECH (STX): Free Stock Analysis Report
YAHOO! INC (YHOO): Free Stock Analysis Report
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