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Major indices declined sharply on Wednesday after minutes from the Federal Reserve’s July meeting gave no clear indications on when its stimulus program would come to a close. Investor apprehensions about the future of the bond buying program have pushed the markets lower recently. The Dow Jones ended in negative territory for the sixth consecutive day, its longest fall in more than a year. Meanwhile, existing home sales increased for the month of July. All the top ten S&P 500 industry groups finished in the red, among which the utilities sector was the worst performer.
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 0.7% to close the day at 14,897.47. The S&P 500 declined 0.6% to finish yesterday’s trading session at 1,642.82. The tech-laden Nasdaq Composite Index fell 0.4% to end at 3,599.79. The fear-gauge CBOE Volatility Index (VIX) jumped 6.9% to settle at 15.94. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.58 billion shares, well below 2013’s average of 6.31 billion shares. Declining stocks outnumbered the advancers. For 72% shares that declined, only 26% advanced.
Benchmarks traded lower for most of the trading session yesterday. Following the release of the Federal Reserve’s minutes, benchmarks declined sharply. Within half an hour stocks, bounced back and erased all the day’s losses. But selling pressure returned in the later part of the trading. The Dow has slipped nearly 4.5% after hitting its highest level on August 2.
Investors were waiting for clues about the timing of the tapering of the bond purchase program. But the Fed minutes provided investors with no indications about when this would occur. Some policymakers of the Federal Reserve agreed that it is not appropriate to taper the bond purchase program as of now. However, few policymakers thought that the pace of the program should slow down. According to the FOMC minutes: “A few members emphasized the importance of being patient and evaluating additional information on the economy before deciding on any changes to the pace of asset purchases.”
On the earnings front, Target Corporation (NYSE:TGT) reported fiscal second quarter results. The retailer’s earnings came in above the Street’s estimates but revenue fell short of expectations. The company’s fiscal second quarter profits declined 13% from a year ago period due to higher costs from its Canadian business. The company said that its annual profit may come in near the lower end of its estimate. Shares declined 3.6% after the announcement of its quarter results.
Shares of Staples, Inc. (NASDAQ:SPLS) tumbled more than 15% following its quarterly results. The largest office supply retailer in the U.S. reported fiscal second quarter earnings and revenues below the Street’s estimates. The company’s profits declined 15% due to weakness in its international sales. The company has also reduced its annual profit estimate. On the positive side, Lowe's Companies, Inc. (NYSE:LOW), reported fiscal second quarter earnings that topped estimates. The company’s profits jumped 26%. Lowe's also increased its full-year outlook. Shares jumped 3.9% yesterday.
On the economic front, the National Association of Realtors reported existing home sales numbers. According to the report, existing home sales increased strongly in July, by 6.5%, to 5.39 million from the downwardly revised June figure of 5.06 million. This was considerably above the consensus estimate of 5.14 million, its highest level in more than three years. In the last twelve months existing home sales have increased 17.2%. According to NAR chief economist Lawrence Yun: “Mortgage interest rates are at the highest level in two years, pushing some buyers off the sidelines.”
The utilities sector was the worst performer among the S&P 500 industry groups and the Utilities SPDR (XLU) lost 1.1%. Stocks such as Duke Energy Corp (NYSE:DUK), the Southern Company (NYSE:SO), Dominion Resources, Inc. (NYSE:D), NextEra Energy, Inc. (NYSE:NEE) and NRG Energy Inc. (NYSE:NRG) slipped 1.5%, 1.4%, 1.0%, 1.7% and 0.2%, respectively.