Benchmarks ended sharply lower as ongoing discussions between Democrats and Republicans on the debt ceiling limit and partial government shutdown failed to lift investor sentiment. Lack of progress on the debt ceiling impasse halted the four consecutive days of gains for the Dow and the S&P 500. Meanwhile, manufacturing activity in the New York region declined to its lowest level in five months. All ten sectors in the S&P 500 industry groups ended in the red led by utilities and industrial sector.
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The Dow Jones Industrial Average (DJI) slipped 0.9% to close the day at 15168.01. The S&P 500 declined 0.7% to finish yesterday’s trading session at 1698.06. The tech-laden Nasdaq Composite Index fell 0.6% to end at 1698.06. The fear-gauge CBOE Volatility Index (VIX) jumped 16.1% to settle at 18.66. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.12 billion shares, considerably lower than 2013’s average of 6.0 billion shares. Declining stocks outnumbered the advancers. For 75% shares that declined, only 23% advanced.
Benchmarks opened marginally lower and were in negative territory throughout the trading session. But stocks extended their losses in the final hour of the trading after Senator Dick Durbin said discussions over the fiscal impasse had been suspended on Tuesday. They are expected to resume once Speaker of the United States House of Representatives John Boehner outlines a fiscal plan that can be presented to the House of Representatives. As time passes, investors are getting increasingly worried about the debt ceiling deadline.
Democrats and Republicans lawmakers need to increase the debt ceiling limit by October 17 to save the country from a possible default on its debt. Democrats have rejected a proposal from House Republicans to end the partial government shutdown. Senate Majority Leader Harry Reid criticized the proposal and said: “I am very disappointed in John Boehner, who once again tried to preserve his role at the expense of the country.”
On the earnings front, Citigroup Inc (NYSE:C) reported third quarter results. The company’s earnings and sales came in below the Street’s estimates. The company’s weaker-than-expected earnings were primarily due to a fall in bond trading revenue which has declined by $1 billion. The company’s shares declined 1.5% yesterday. On the other hand, The Coca-Cola Company (NYSE:KO) reported its third quarter earnings which came in line with the Street’s estimates. However, revenue fell slightly short of expectations. The company’s revenue dropped 3% to $12.03 billion from $12.34 billion.
Shares of Johnson & Johnson (NYSE:JNJ) moved slightly higher after the company announced its quarterly results. Both earnings and revenue came in above the Street’s estimates. Johnson & Johnson’s better-than-expected quarterly results were primarily boosted by robust growth for its prescription drugs.
On the home front, manufacturing activity in New York declined sharply in the month of October. According to the Federal Reserve Bank of New York, the general business conditions index declined to 1.52 in October from previous month’s figure of 6.29. This was considerably below the consensus estimate of 5.3. However, the new orders index jumped to 7.75 from 2.35. But the shipments index declined to 13.12 from 16.43.
Utilities sector was the biggest loser among the S&P 500 industry groups and the Utilities SPDR (XLU) lost 1.4%. Stocks such as Public Service Enterprise Group Inc. (NYSE:PEG), Exelon Corporation (NYSE:EXC), PG&E Corporation (NYSE:PCG), Consolidated Edison, Inc. (NYSE:ED) and Duke Energy Corp (NYSE:DUK) slipped 1.4%, 1.7%, 2.1%, 1.2% and 1.1%, respectively.