Stock Market News for October 02, 2015

Benchmarks started the last quarter of the year on a mixed note on concerns about weak Chinese economy and dismal domestic manufacturing data. Investors also remained cautious ahead of non-farm payroll data, which is scheduled for release today and is anticipated to play an important role in the rate hike decision. While the S&P 500 and Nasdaq managed to finish in the green following a choppy trading session, the Dow ended in negative territory on Thursday.

For a look at the issues currently facing the markets, make sure to read today's Ahead of Wall Street article

The Dow Jones Industrial Average (DJI) declined nearly 0.1% to close at 16,272.01. However, the Standard & Poor's 500 (S&P 500) rose 0.2% to close at 1,923.82. The tech-laden Nasdaq Composite Index closed at 4,627.08, gaining nearly 0.2%. The fear-gauge CBOE Volatility Index (VIX) declined 8% to settle at 22.55. A total of around 7.54 billion shares were traded on Thursday, higher than the last 20-sessions' average of 7.25 billion. Decliners outpaced advancing stocks on the NYSE. For 50% stocks that declined, 48% advanced.

On Thursday, China's official data showed that manufacturing purchasing managers index increased to 49.8 in September from August's reading of 49.7. Reading below 50 indicated that manufacturing activity remained in contraction territory. Moreover, the Caixin China manufacturing PMI declined in September to a six-year low of 47.2 from August's 47.3, also indicating contraction in the sector. Weak Chinese manufacturing data dampened investor sentiment.

On the domestic front, the Institute for Supply Management (ISM) Manufacturing Business Survey Committee reported that ISM Manufacturing Index in the US declined from August's 51.1 to 50.2 in September, hitting its lowest mark in last two years. September's reading also came below the consensus estimate of 50.6. Though the reading above 50 indicated expansion in manufacturing sector, the decline indicated that rate of expansion slowed last month. It is speculated that weak global growth scenario was the main reason behind the decline.

Additionally, the U.S. Department of Labor reported that jobless claims rose 10,000 from previous week to 277,000 in the week ending Sep 26, higher than the consensus estimate of 271,500. However, the report showed that 4-week moving average declined 1,000 to 270,750 in the week, signaling strong labor market conditions.

Meanwhile, two of the Federal committee voting members triggered the possibility of a rate hike in October's meeting. John Williams, president of Federal Reserve Bank of San Francisco, indicated that there is a high possibility of a lift-off in October. He said: "When you have a close decision (September meeting) like that, it doesn't take a lot of information to tip the balance… I would view October to be a completely live meeting."

Also, president of the Federal Reserve Bank of Richmond, Jeffrey Lacker, said that he voted in favor of rate hike in September. He also said that the Fed officials may realize by October's meeting that the US economy has recovered enough to sustain a rate hike. He said: "American consumers aren't spooked. American businesses aren't pulling back. We're on track."

Comments regarding a rate hike from two important Federal officials had a negative impact on the Utilities Select Sector SPDR (XLU). The sector declined 1.2% and was the biggest loser among the S&P 500 sectors on Thursday. Key utilities stocks including Duke Energy Corporation ( DUK ), NextEra Energy, Inc. ( NEE ), Dominion Resources, Inc. ( D ), Southern Company ( SO ) and American Electric Power Co., Inc. ( AEP ) lost 1.8%, 1%, 1.7%, 1.1% and 1.3%, respectively. Two out of 10 S&P 500 sectors finished in negative territory.

However, the U.S. Census Bureau reported that construction spending in August rose by 0.7% from July to a seasonally adjusted annual rate of $1,086.2 billion, higher than the consensus estimate of 0.6% rise. The report indicated strong housing-market conditions. This encouraging housing report boosted the SPDR S&P Homebuilders (XHB), which gained 1.2% yesterday. Key stocks from this sector including DR Horton Inc. ( DHI ), Owens Corning ( OC ), Lennar Corporation ( LEN ) and PulteGroup, Inc. ( PHM ) rose 0.8%, 2.3%, 1.5% and 1.3%, respectively.

Moreover, Autodata reported that total sales in the US auto sector came in at 18.17 million in September, witnessing its highest pace since Jul 2005. Three major US auto manufacturers - General Motors Company ( GM ), Ford Motor Co. ( F ) and Fiat Chrysler Automobiles N.V. ( FCAU ) - registered double-digit increase in sales last month. Shares of General Motors, Ford Motor and Fiat Chrysler Automobiles rose 2.2%, 0.7% and 2.4%, respectively, following the encouraging auto sales data.

Also, gains in biotech stocks had a positive impact on benchmarks. The iShares Nasdaq Biotechnology (IBB) gained 0.5% yesterday following its strong rebound a day before. Key biotech stocks including Celgene Corporation ( CELG ), Amgen Inc. ( AMGN ), Regeneron Pharmaceuticals, Inc. ( REGN ) and Alexion Pharmaceuticals, Inc. ( ALXN ) gained 4.3%, 1.4%, 1.7% and 0.9%, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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