Benchmarks were hammered during Friday’s trading session after investors grew skeptical over discouraging comments regarding the tapering of the bond purchase program. On the international front, consumer sentiment of the Euro Zone region for the month of September increased to its highest level in the past two years. All the top ten S&P 500 industry groups ended in the red, among which utilities stocks suffered maximum losses.
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The Dow Jones Industrial Average (DJI) lost 1.2% to close the day at 15,451.09. The S&P 500 decreased 0.7% to finish Friday’s trading session at 1,709.92. The tech-laden Nasdaq Composite Index slipped 0.4% to end at 3,774.728. The fear-gauge CBOE Volatility Index (VIX) decreased 0.3% to settle at 13.12. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 8.43 billion shares, well above 2013’s average of 6.24 billion shares. Declining stocks outnumbered the advancers. For 71% shares that declined, 27% advanced.
Benchmarks gained steam after the Federal Reserve decided not to taper the massive $85 billion bond purchase program. However, during Friday’s trading session, markets fizzled out after a couple of Fed officials made disparaging remarks regarding the decision. In spite of the benchmarks’ battering on Friday, major indices managed to garner profits for the whole week. The Dow Jones, S&P 500 and the Nasdaq gained 0.6%, 1.3% and 1.4%, respectively.
In an interview to Bloomberg, the president of the St. Louis Federal Reserve, James Bullard, said it is highly possible that the tapering of the bond purchase program might take place in the month of October. However, later in a speech given by him in New York, he contradicted himself by saying that the decision on tapering the bond purchase program will be taken patiently, especially since the inflation rate is nowhere near the pre-determined target.
On the other hand, president of the Kansas City Federal Reserve, Esther George, disagreed with the Fed’s decision of not scaling back the bond purchase program. She added that delaying the decision regarding the tapering of the bond purchase program will put the credibility of the Central bank at risk.
On the international front, consumer confidence of the Euro Zone region improved to -14.9 in September compared to -15.6 in August. However, this is marginally below the market estimate of -14.5. Consumer sentiment for the European Union increased to -11.7 compared to -12.8 recorded in August. The Euro Zone region had emerged from the two year long recession on the back of improving economies of France and Germany. However, the recovery seems to be weak as economies of Greece, Portugal and Spain are yet to see the daylight. On the major economies of the Euro Zone region, Italy had to slash its growth expectations on Friday and will also take some severe steps to narrow the budget deficit to attain 3% growth rate.
Utilities stocks were the biggest losers during yesterday’s trading session. The Utilities SPDR (XLU) lost 1.5%. Stocks such as Public Service Enterprise Group Inc. (NYSE:PEG), Exelon Corporation (NYSE:EXC), NRG Energy Inc (NYSE:NRG), FirstEnergy Corp. (NYSE:FE) and American Electric Power Company Inc (NYSE:AEP) lost 1.9%, 2.3%, 1.0%, 3.3% and 2.1%, respectively.
Industrials stocks also had a very bad trading day. The Industrials SPDR (XLI) lost 1.2%. Stocks such as United Technologies Corporation (NYSE:UTX), Honeywell International Inc. (NYSE:HON), The Boeing Company (NYSE:BA), Stanley Black & Decker, Inc. (NYSE:SWK) and 3M Co (NYSE:MMM) lost 2.2%, 1.5%, 2.0%, 1.5% and 1.3%, respectively.