Benchmarks retreated from yesterday’s highs and finished mixed after Republicans supported a military strike on Syria. Among the economic data which were released yesterday, ISM manufacturing index and construction spending came in above estimates. In what is probably the year’s most significant corporate development, Microsoft acquired Nokia’s mobile handset business and licenses of patents for $7.2 billion. Of the top ten S&P 500 industry groups financials stocks gained the most. However, utilities stocks suffered maximum losses.
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The Dow Jones Industrial Average (DJI) increased 0.2% to close the day at 14,833.96. The S&P 500 increased 0.4% to finish yesterday’s trading session at 1,639.77. The tech-laden Nasdaq Composite Index gained 0.6% to end at 3,612.61. The fear-gauge CBOE Volatility Index (VIX) dropped 2.4% to settle at 16.61. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.6 billion shares, marginally above 2013’s average of 6.31 billion shares. Advancing stocks outnumbered the decliners. For 55% shares that advanced, 43% declined.
Last week, the S&P 500 dropped nearly 1.8% after it became increasingly clear that the US will strike Syria. However, before executing any decision, US President, Barack Obama had sought approval from the Congress. This injected optimism within investors. Hence, the S&P 500 gained more than 1% during yesterday’s early trading session. However, during the latter part of the trading day, gains were trimmed after Republicans announced their support for a military strike on Syria. Republicans’ top policy makers, John Boehner and Eric Cantor were in favor of a military strike on Syria.
According to the Institute of Supply Management, the manufacturing index for August came in at 55.7%. This is above July’s figure of 55.4% and consensus estimates of 53.9%. The manufacturing index has witnessed an increase for the third straight month now. This also implies that the US economy is gradually gaining steam. The New Orders Index increased 4.9% points to 63.2%. The Production Index decreased 2.6% points to 62.4% while the Employment Index decreased 1.1% points to 54.4%. Among the ten major components which constitute the manufacturing sector index, the Production Index and Employment Index witnessed decreases.
According to the U.S. Department of Commerce, construction spending for the month of July increased 0.6% to $900.8 billion. This was above the consensus estimate of 0.3%. On a year over year basis, construction spending has increased 5.2%. Private construction spending increased 0.9% to $631.4 billion while public construction spending increased at 0.3% to $269.4 billion.
Shares of Microsoft Corporation (NASDAQ:MSFT) declined 4.6% after the company purchased Nokia’s mobile phone business for $7.2 billion. According to this deal, apart from transferring Nokia’s 32,000 employees to Microsoft, the company will also purchase the mobile handset business and licenses of its patents. This announcement comes after Microsoft’s CEO, Steve Ballmer decided to resign in the next 12 months. Post this acquisition, Microsoft will directly compete with mobile manufacturing giants such as Samsung and Apple Inc. (NASDAQ:AAPL).
The financials sector gained the most among the top ten S&P 500 industry groups. The Financial SPDR (NYSEARCA: XLF) gained 0.8%. Stocks such as Wells Fargo & Co (NYSE:WFC), JPMorgan Chase & Co (NYSE:JPM), Bank of America Corp (NYSE:BAC), Goldman Sachs Group Inc (NYSE:GS) and Morgan Stanley (NYSE:MS) gained 0.8%, 1.2%, 0.9%, 1.7% and 2.0%, respectively.
Utility stocks suffered the most during yesterday’s trading sessions. The Utilities SPDR (NYSEARCA: XLU) lost 1.2%. Stocks such as American Electric Power Company Inc (NYSE:AEP), Public Service Enterprise Group Inc. (NYSE:PEG), Duke Energy Corp (NYSE:DUK), NextEra Energy, Inc. (NYSE:NEE) and Sempra Energy (NYSE:SRE) lost 1.5%, 0.9%, 1.0%, 0.7% and 1.2%, respectively.