Disappointing business activity data and other signals of a weak
economy left the benchmarks languishing in the red on Friday.
Benchmarks also ended the week on a losing note. However, markets
registered their best third quarter since 2010. The S&P 500
jumped a significant 5.9% in the third quarter.
The Dow Jones Industrial Average (DJI) lost 0.4% to end at
13,437.13. The Standard & Poor 500 (S&P 500) slipped 0.5%
to finish Friday's trading session at 1,440.67. The tech-laden
Nasdaq Composite Index declined 0.7% to close at 3,116.23. The
fear-gauge CBOE Volatility Index (VIX) rose 6% to settle at 15.73.
Consolidated volumes on the New York Stock Exchange, American Stock
Exchange and the Nasdaq were roughly 6.15 billion shares, short of
the year-on-year daily average volume of 6.38 billion. Declining
stocks outpaced the advancers on the NYSE; as for 59% stocks that
dropped, 38% stocks moved higher.
For the week, the Dow slipped 1%, the S&P 500 shed 1.3% and
Nasdaq lost 2%. Benchmarks suffered through the week as a number of
disappointing developments on the domestic and international fronts
affected markets. Amidst these dismal developments, a small number
of encouraging economic reports failed to boost investor
Earlier in the week, the German business confidence had suffered
a larger-than-expected decline in September, which was followed by
comments from a key Fed official that the central bank's bond
buying program will not be effective enough to accelerate growth or
improve the employment scenario. Also, most of the economic
readings were discouraging. Among them, new home sales and pending
home sales declined in August. Separately, durable orders reported
a sharp fall in August and the final reading of second quarter GDP
growth fell short of consensus estimates. Despite these encouraging
reports, initial claims dropped sharply and consumer confidence
Coming back to Friday's developments, a decline in new orders
dented business activity in the U.S. Midwest in September, which
shrank to its lowest level since September 2009. The Thomson
Reuters/University of Michigan Index dropped to 78.3 in September,
down from 79.2 in August and was also short of consensus
expectations of 78.7. Separately, the Chicago Purchase Managers
Index decreased to 49.7 in September, down from 53 in August and
lower than consensus estimates of 52.9.
Meanwhile, the U.S. Department of Commerce said Personal
Consumption Expenditures (PCE) had increased 0.5% in August, up
from 0.4% in July. This was in line with consensus estimates.
Consumer spending recorded the highest jump in six months. A
hike in gasoline prices resulted in the jump in consumer spending.
Personal income increased by 0.1% in August, flat with the July
level. The figure came in short of consensus estimates of 0.2%.
Coming to developments abroad, stress tests results for Spanish
banks was released on Friday. Seven Spanish banks failed to qualify
the stress test, which was however within expectations. Also, an
independent audit of Spain's 14 major banks by consultant Oliver
Wyman noted that around 59.3 billion euros ($76.3 billion) would be
required to revive these banks.
However, the region continued to keep investor sentiment gloomy
after ratings agency Egan-Jones downgraded the sovereign rating of
Spain to 'junk'. The nation thereafter awaited Moody's verdict on
its sovereign rating.
Coming to the sectors, housing was a major loser on Friday and
the SPDR S&P Homebuilders (XHB) plunged 0.8%. Among the stocks,
Hovnanian Enterprises, Inc. (NYSE:
), Beazer Homes USA, Inc. (NYSE:
), Standard Pacific Corp. (NYSE:
), The Ryland Group, Inc. (NYSE:
) and KB Home (NYSE:
) lost 3.1%, 3.0%, 2.7%, 2.6% and 1.8%, respectively.
BEAZER HOMES (BZH): Free Stock Analysis Report
HOVNANIAN ENTRP (HOV): Free Stock Analysis
KB HOME (KBH): Free Stock Analysis Report
RYLAND GRP INC (RYL): Free Stock Analysis
STANDARD PAC (SPF): Free Stock Analysis Report
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