Stocks ended mixed on the first trading day of the fourth
quarter as positive manufacturing data was somewhat offset by
discouraging comments from the central bank chairman. Benchmarks
started the day on a winning note boosted by a surprise jump in
manufacturing sector activity. However, a chunk of the gains were
eroded after Federal Reserve Chairman Ben Bernanke suggested that
the rate of growth might be "insufficient to put people back to
work".
The Dow Jones Industrial Average (DJI) gained 0.6% and closed at
13,515.11. The Standard & Poor 500 (S&P 500) rose 0.3% and
finished yesterday's trading session at 1,444.49. The tech-laden
Nasdaq Composite Index closed at 3,113.53, after falling 0.1%. The
fear-gauge CBOE Volatility Index (VIX) added 3.8% to settle at
16.32. Consolidated volumes on the New York Stock Exchange,
American Stock Exchange and the Nasdaq were roughly 6.3 billion
shares, marginally lower than the year-on-year daily average volume
of 6.38 billion. The advancers on the New York Stock Exchange
outpaced the declining stocks; as for 60% stocks that gained, 37%
stocks closed lower.
The initial spark for the day was provided by a report from the
Institute for Supply Management (ISM) that said economic activity
in the manufacturing sector had expanded for the first time since
May. An increase in new orders and employment drove the
manufacturing sector higher in September. According to the ISM,
"The PMI registered 51.5 percent, an increase of 1.9 percentage
points from August's reading of 49.6 percent, indicating a return
to expansion after contracting for three consecutive months. The
New Orders Index registered 52.3 percent, an increase of 5.2
percentage points from August, indicating growth in new orders
after three consecutive months of contraction". For the first time
in four months the PMI registered a reading above 50. The report
noted: "A reading above 50 percent indicates that the manufacturing
economy is generally expanding; below 50 percent indicates that it
is generally contracting". Consensus estimates had projected the
figure to come in at 49.9%.
Separately, PMI data was also released for China and the
Euro-zone. The euro zone PMI for September was revised upward to
46.1 from its earlier reading of 46. The August reading for the
same was 45.1. The PMI readings suggested contraction as it
remained below 50. Nonetheless, the euro rose against the dollar by
0.3% following the paltry improvement in the region's PMI.
Separately, China's official PMI was up from 49.2 in August to 49.8
in September.
Meanwhile, the U.S. Department of Commerce said construction
spending had decreased 0.6% from July to a seasonally adjusted
annual rate of $837.1 billion in August. This was the biggest
decline since July last year and the second consecutive month of
declines.
As already mentioned, comments from the Fed Chairman had
somewhat dented the markets yesterday. Speaking at the Economic
Club of Indiana, Bernanke defended the bond buying plan. However,
investor sentiment took a hit when he said the economy is unable to
grow at a pace fast enough to reduce the high level of
unemployment. He said: "Our concern is not really a recession. Our
concern is that growth will continue but at a pace that's
insufficient to put people back to work".
Separately, investors awaited Moody's verdict on Spain's
sovereign rating. Moody's Investors Service has so far left the
financial arena apprehensive over whether it will downgrade the
country's sovereign rating to 'junk'.
However, Moody's made a statement regarding the quantum of funds
that would be required to revive Spanish banks. Previously,
consultant Oliver Wyman had said around 59.3 billion euros ($76.3
billion) would be required to revive the Spanish banks. But,
Moody's said that such recapitalization is "credit positive, but
may be insufficient."
Coming to the sectors, Consumer Staples Select Sector SPDR (XLP)
was the major gainer, surging 0.7%. Among the stocks, Kraft Foods
Inc. (NASDAQ:
KFT
), Monster Beverage Corp. (NASDAQ:
MNST
), The Coca-Cola Company (NYSE:
KO
), Philip Morris International Inc. (NYSE:
PM
) and The Procter & Gamble Company (NYSE:
PG
) gained 2.8%, 1.8%, 1.2%, 0.9% and 0.1%, respectively.
KRAFT FOODS INC (KFT): Free Stock Analysis
Report
COCA COLA CO (KO): Free Stock Analysis Report
MONSTER BEVERAG (MNST): Free Stock Analysis
Report
PROCTER & GAMBL (PG): Free Stock Analysis
Report
PHILIP MORRIS (PM): Free Stock Analysis Report
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