A report suggesting contraction in US manufacturing activity
took a toll on investor sentiment and benchmarks ended mostly lower
on Tuesday. While markets looked en route for a bigger fall,
tech-bellwether Apple's shares rallied strongly to cut some of the
losses by the end of the day.
The Dow Jones Industrial Average (DJI) dropped 0.4% and ended at
13,035.94. The Standard & Poor 500 (S&P 500) slipped a mere
0.1% to finish Tuesday's trading session at 1,404.94. The
tech-laden Nasdaq Composite Index edged up 0.3% and closed at
3,075.06. The fear-gauge CBOE Volatility Index (VIX) added 2.9% and
settled at 17.98. Consolidated volumes on the New York Stock
Exchange, the American Stock Exchange and Nasdaq were roughly 5.53
billion shares, lower than last year's daily average of 7.84
billion. Advancing stocks outpaced the decliners on the NYSE; as
for 57% stocks that advanced, 39% stock closed lower.
Much of the day's action was dominated by discouraging economic
readings before a surge in Apple Inc.'s (NASDAQ:
) shares helped to somewhat offset the negative sentiment. As for
the economic readings, investors were dealt a rude shock when they
learnt manufacturing activity was at its lowest level since July
2009. The Institute for Supply Management reported that the
Purchasing Managers' Index (PMI) dropped 0.2% to 49.6% in August.
This marked not only the lowest level for the PMI, but was also the
third straight month that the index contracted. The ISM
Manufacturing Index is based on surveys of 300 purchasing managers
nationwide, representing 20 industries regarding manufacturing
activity. Thus, this is definitely a key index and the contraction
is being viewed is as a grim headwind.
Also, the U.S. Census Bureau of the Department of Commerce
reported that construction spending declined 0.9% from the June
estimate to a seasonally adjusted annual rate of $834.4 billion in
July. The 0.9% decline was in contrast to consensus estimates of a
0.4% gain. Further, spending on private construction dropped 1.2%
from June and public construction spending slipped 0.4%.
Markets traded in the red following these reports. However, an
invitation by Apple for an event next week lifted the mood. The
event is believed to shed a definite light on the long-anticipated
iPhone 5. This will be the latest version of iPhone after Apple
unveiled iPhone 4S late last year. Following the launch of iPhone
4S, markets had been expecting iPhone 5. News about the invitation
sparked off cheers and Apple's shares ended 1.5% higher at $674.97
Apple is the Nasdaq's biggest component and is also the most
valuable company in the world currently. Movement in Apple's shares
has the potential to drive the broader markets at times, and such
was the case yesterday. The Nasdaq rebounded from a loss and the
S&P 500 managed to negate most of its day's losses.
However, other major tech shares did not enjoy a winning rally
and stocks such as Oracle Corporation (NASDAQ:
), Microsoft Corporation (NASDAQ:
), Intel Corporation (NASDAQ:
), Dell Inc. (NASDAQ:
), SanDisk Corporation (NASDAQ:
) and Cisco Systems, Inc. (NASDAQ:
) dropped 0.3%, 1.4%, 1.7%, 0.3%, 0.8% and 0.5%, respectively.
On the other hand, investors also waited to see what European
Central Bank (ECB) President Mario Draghi has to announce after the
ECB meeting on Thursday. Last week, US Federal Reserve Chairman Ben
Bernanke had announced that the central bank "will provide
additional policy accommodation as needed to promote a stronger
economic recovery and sustained improvement in labor market
conditions in a context of price stability". However, he stopped
short of announcing any economic measures at the moment.
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