Weak domestic and Chinese economic readings dragged the
benchmarks down yesterday. Moreover, heavyweights Apple and Intel
both slumped to guide the broader markets into the red. Yesterday's
losses came after the recent robust rally that witnessed benchmarks
touching multi-year highs. Investors also preferred to wait for the
outcome of the central bank's policy meet later this week.
The Dow Jones Industrial Average (DJI) ended 0.4% lower at
13,254.29. The Standard & Poor 500 (S&P 500) edged down
0.6% and finished yesterday's trading session at 1,429.08. The
tech-laden Nasdaq Composite Index inched down by a percentage point
to close at 3,104.02. The fear-gauge CBOE Volatility Index (VIX)
soared 13.2% to settle at 16.28. Consolidated volumes on the New
York Stock Exchange, Nasdaq, and the American Stock Exchange were
roughly 5.56 billion shares, lower than prior year's average of
7.84 billion shares. Declining stocks outpaced the advancing ones
on the NYSE by a ratio of 3:2.
On a day devoid of any other major headlines, investors focused
on a couple of economic readings. Unfortunately, data from the
domestic economy as well as China was far from optimistic. China
suffered its third straight month of decline in imports. The figure
dropped 2.6% year on year in August and was also below estimates of
3.5% gain. Even exports expanded by 2.7% compared to estimates of a
3% hike.
While these two figures showed signs of weakness, concerns were
further intensified after China's industrial output decelerated to
the slowest level in three years. The measure of industrial
production showed a growth of 8.9% in August, down from growth in
factory production of 9.2% in the prior month. These concerns were
mirrored in the comments of Chinese President Hu Jintao, who said
"Pressure for economic growth to slow is obvious".
Coming to the domestic front, The Federal Reserve reported that
the US had reduced credit card spending in July. According to data
from the Board of Governors of the Federal Reserve System, "In
July, total consumer credit decreased at a seasonally adjusted
annual rate of 1-1/2 percent. Revolving credit decreased at an
annual rate 6-3/4 percent, and nonrevolving credit increased at an
annual rate of 1 percent". This was the second consecutive month of
decline and came in contrary to consensus estimates of a gain of
8.5%.
These negative economic readings taxed heavily on the markets as
they retreated into the negative zone after a recent healthy run.
Benchmarks enjoyed an upward rally late last week and on Thursday
the robust gains had helped them achieve multi-year highs. After
the robust gains on Thursday, benchmarks had a relatively lighter
session on Friday, when the nonfarm payroll report was tepid but
eventually helped to spark hopes about the additional economic
measures by the US Federal Reserve.
Labor data is a key indicator of economic health. Strategists
opined that weak numbers would possibly make the US Federal Reserve
prioritize the need for additional economic measures. With the
policy meeting of the central bank scheduled later this week,
investors opted to wait and watch before betting big bucks.
Separately, tech heavyweights Apple Inc. (NASDAQ:
AAPL
) and Intel Corporation (NASDAQ:
INTC
) suffered declines of 2.6% and 3.8%, respectively, which also led
to a fall in technology shares. The Technology Select Sector SPDR
(XLK) was down 1.1%. In fact, declines in the technology sector
also affected the broader markets as Apple is the largest component
of the Nasdaq. Among other tech shares, Microsoft Corporation
(NASDAQ:
MSFT
), Oracle Corporation (NASDAQ:
ORCL
), Yahoo! Inc. (NASDAQ:
YHOO
), Google Inc. (NASDAQ:
GOOG
) and Amazon.com Inc. (NASDAQ:
AMZN
) dropped 0.7%, 0.9%, 0.7%, 0.8% and 0.8%, respectively.
APPLE INC (AAPL): Free Stock Analysis Report
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GOOGLE INC-CL A (GOOG): Free Stock Analysis
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INTEL CORP (INTC): Free Stock Analysis Report
MICROSOFT CORP (MSFT): Free Stock Analysis
Report
ORACLE CORP (ORCL): Free Stock Analysis Report
YAHOO! INC (YHOO): Free Stock Analysis Report
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