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Benchmarks ended in the red following disappointing results from Coca-Cola. Investors were also wary a day before Federal Reserve’s chairman, Ben Bernanke’s testimony. Encouraging domestic reports and positive earnings from Goldman Sachs failed to boost investor sentiment. Meanwhile, Europe saw car sales registration figures fall to their lowest in the past two decades. Import figures of the Euro Zone fell while export figures remained unchanged for the month of May. Of the top ten S&P 500 industry groups, technology stocks were the only gainers while materials stocks suffered the most.
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) lost 0.2% to close the day at 15,451.85. The S&P 500 declined 0.4% to finish yesterday’s trading session at 1,676.26. The tech-laden Nasdaq Composite Index slipped 0.3% to end at 3,598.50. The fear-gauge CBOE Volatility Index (VIX) increased 4.6% to settle at 14.42. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.5 billion shares, below 2013’s average of 6.4 billion shares. Declining stocks outnumbered the advancers. For the 60% that declined, 37% advanced.
The S&P 500 and the Dow Jones ended their three day gaining streak after the Coca-Cola Company (NYSE:KO) reported below-than-expected results. The company reported revenues of $12.75 billion, below the Street’s expectation of $12.96 billion. However, adjusted EPS was in line with estimates. On a year over year basis, revenue of the company increased 15.5% while the EPS increased 37%. Weak sales in Europe are mainly responsible for lower-than-expected revenue.
On the positive side, Goldman Sachs Group Inc. (NYSE:GS) reported earnings above the Street’s expectations. The company’s profits nearly doubled from trading and investment banking business. Net Revenue of the company came in at $8.61 billion compared to $6.6 billion recorded in the previous year. Net income of the company almost doubled to $1.93 billion from $962 million registered in the year-ago period.
Bernanke’s testimony in May triggered a sell-off after which the S&P 500 lost as much as 6%. However, after several assurances from Fed policymakers, losses were recovered. Investors have now turned cautious since Bernanke’s semi-annual congressional testimony is due on Wednesday. Bernanke’s tenure is likely to end in January; hence, this might be his last such testimony.
Positive economic data failed to boost investor sentiment. According to data released by the Federal Reserve System, industrial production for June increased 0.3%, above the consensus estimate of 0.2%. Manufacturing production increased 0.3% while output from mines increased 0.8%.However, output of utilities declined 0.1%.
Meanwhile, according to the U.S. Department of labor, the Consumer Price Index increased 0.5% in June, above the consensus estimate of 0.3%. A rise in food, energy and gasoline prices is responsible for the increase in CPI. On a month over month basis, prices of food and energy have increased 0.2%. The food index has increased 3.2% while the energy index has risen 1.4%, since last year.
On the international front, according to the European Automobile Manufacturers' Association (ACEA), in the first half of the year, car sales has fallen the most in past 20 years on a six-month basis. Car sales have dropped 6.3% for the month of June. The Euro Zone has been reeling under a financial crisis following which unemployment levels increased significantly. Among major car manufacturing companies in Europe, Italy’s Fiat witnessed a sales decline of 13.6%. Ford and France’s Peugeot witnessed decreases of 6.9% and 10.9%, respectively.
Trade surplus for the Euro Zone region expanded owing to a decrease in imports. For the month of May, imports contracted 6% while exports remained unchanged. Among the region’s largest economies, imports in Germany, France, Spain and Italy dropped 1%, 2%, 4% and 6%, respectively. Exports to the U.S increased 2% while imports fell 7%. Following a decrease in imports, the trade surplus for the region increased to $15.2 billion euros, better than the 14.1 billion euros recorded in April. Inflation in the Euro Zone increased to 1.6% but remained lower than the European Central Bank’s target of 2%.
Technology stocks were the only gainer among the top ten S&P 500 industry groups. The Technology SPDR (XLK) gained 0.1%.Stocks such as Apple Inc. (NASDAQ:AAPL), Intel Corporation (NASDAQ:INTC), Microsoft Corporation (NASDAQ:MSFT), Hewlett-Packard Company (NYSE:HPQ) and Advanced Micro Devices, Inc. (NYSE:AMD) increased 0.6%, 1.3%, 0.3%, 0.3% and 0.7%, respectively.
Materials stocks were the biggest losers. The Materials Select Sector (XLB) lost 0.8%. Stocks such as Monsanto Company (NYSE:MON), the Dow Chemical Company (NYSE:DOW), FMC Corp (NYSE:FMC), Praxair, Inc. (NYSE:PX) and Air Products & Chemicals, Inc. (NYSE:APD) lost 1.6%, 1.3%, 1.5%, 0.4% and 1.2%, respectively.