Benchmarks ended in the red on Wednesday after dismal earnings from heavy equipment maker Caterpillar and a decline in oil prices dampened investor sentiments. This marked the end of the four consecutive record closes for the S&P 500. Yesterday’s losses came a day after stocks finished higher buoyed by a tepid jobs report which reassured investors that the Fed will keep pumping money into the economy at the same pace. Declining oil prices meant that the energy sector was the biggest loser among the S&P 500 industry groups. Consumer staples stocks gained the most.
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The Dow Jones Industrial Average (DJI) lost 0.4% to close the day at 15,413.26. The S&P 500 slipped 0.5% to finish yesterday’s trading session at 1,746.36. The tech-laden Nasdaq Composite Index decreased 0.6% to end at 3,907.07. The fear-gauge CBOE Volatility Index (VIX) edged up 0.7% to settle at 13.42. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.7 billion shares, lower than 2013’s average of 6.0 billion shares. Declining stocks outnumbered the advancers. For 53% shares that declined, 44% advanced.
Stocks have had a decent rally over the last two weeks. Gains in the markets have been driven by an end to the sixteen-day long partial government shutdown and a successful debt ceiling deal. Tuesday’s weaker-than-expected government jobs report eased investor concerns about the prospects of the Fed reducing bond buying in its next meeting. The S&P 500 has gained nearly 6% over the prior two weeks.
Dismal quarterly results from heavy equipment maker Caterpillar Inc. (NYSE:CAT) was largely responsible for dragging the markets lower. Caterpillar not only posted weaker-than-expected third quarter profits but also reduced its full-year forecast once again due to a decline in the demand for mining equipment. The company reported quarterly profits of $946 million, sharply below the year ago figure of $1.7 billion. Total sales and revenue declined 18% to $13.4 billion. The company said next year sales will remain flat or may increase or decrease by 5% in comparison with 2013. Following these results, shares plunged more than 6% yesterday.
On the other hand, The Boeing Company (NYSE:BA) posted robust third quarter earnings. Both earnings and revenue comfortably surpassed the Street’s estimates. The company’s quarterly profits surged 12% as lower profits from its defense business were overshadowed by higher margins and an increase in production of commercial aircraft. The company also raised its earnings per share estimate for the current year. Boeing is now expecting earnings per share in the range of $6.50 to $6.65, up from the previous estimate of $6.20 to $6.40. Shares jumped more than 5% after the announcement of results.
As of now, 160 companies have reported their quarterly numbers. About 66% of the companies have beaten the Street’s estimates, a figure which is marginally above the historical average. Nearly 54% have surpassed revenue estimates.
Oil prices declined to their lowest level in nearly four months, dragging energy stocks lower. The Energy Select Sector SPDR (XLE) lost 1.5% yesterday. Stocks such as Chevron Corporation (NYSE:CVX), Exxon Mobil Corporation (NYSE:XOM), Hess Corp. (NYSE:HES), Schlumberger Limited. (NYSE:SLB) and ConocoPhillips (NYSE:COP) slipped 0.4%, 0.4%, 2.0%, 1.7% and 1.2%, respectively.
Consumer staples stocks gained the most among the top ten S&P 500 industry groups. Consumer Staples Select Sect. SPDR (XLP) gained 0.3%. Stocks such as the Procter & Gamble Company (NYSE:PG), Philip Morris International Inc. (NYSE:PM), CVS Caremark Corporation (NYSE:CVS), Walgreen Company (NYSE:WAG) and Lorillard Inc. (NYSE:LO) gained 0.7%, 0.4%, 0.1%, 0.2% and 1.0%, respectively.