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Expectations for a favorable outcome from the Federal Reserve meeting regarding the stimulus plan helped the S&P 500 climb to a new high but fellow benchmarks ended in the red. Shares of Merck & Co suffered a 2.6% fall and the pharma major was a big drag on the Dow which incurred marginal losses. A couple of economic reports were also released. Industrial production increased in September, whereas pending home sales declined for the fourth consecutive month. Consumer Staples enjoyed the biggest gains among all the S&P 500 sectors.

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) slipped 0.01% to close the day at 15,568.93. The S&P 500 rose 0.1% to finish yesterday’s trading session at 1762.11. The tech-laden Nasdaq Composite Index fell 0.1% to end at 3940.13. The fear-gauge CBOE Volatility Index (VIX) inched up 1.7% to settle at 13.31. Consolidated volumes on the New York Stock Exchange were 3.3 billion shares. Declining stocks outnumbered the advancers. For 53% shares that declined, only 44% advanced.

Last week, investor sentiment was boosted by tepid government jobs data that eased investor concerns about the prospects of the Fed reducing bond buying in its next meeting. Now, markets experts opine that the Fed will continue with its current stimulus plan, more so due to the political impasse that led to the 16-day government partial shutdown and hiking prices. Strategists are of the view that Fed is “not likely to surprise the markets”.

Coupled with expectations from the Fed, the S&P 500’s marginal increase was also somewhat attributed to J.C. Penney Company, Inc.’s (NYSE:JCP) CEO stating that sales have been improving. Following these comments, shares of the popular retailer added a significant 8.8% yesterday. In fact, this development also helped to partially offset the 2.6% fall in shares of Merck & Co., Inc. (NYSE:MRK). Merck’s shares dropped owing to a decline in sales of the company’s Januvia diabetes treatment, which raised concerns about growth possibilities for its largest product.

Meanwhile, the Board of Governors of the Federal Reserve System reported a 0.6% increase in industrial production in September, beating the consensus estimate of 0.4%. This was also better than the 0.4% gain in August. Manufacturing output increased 0.1% compared with previous month’s gain of 0.5%. Production at mines increased 0.2%, which grew at an annual rate of 12.9% in its third quarter. Utilities increased 4.4% compared to continuous declines in the previous five months.
 
The National Association of Realtors reported that the pending home sales index dropped 5.6% to 101.6 in September. This was the fourth consecutive decline and the index is now at its lowest since it touched 101.3 in December 2012. The month’s fall was attributed to an increase in the mortgage interest rate and higher home prices.
 
The Consumer Staples sector was the biggest gainer among the S&P 500 industry groups and the Consumer Staples SPDR (XLP) gained 1.3%. Stocks such as The Procter & Gamble Company (NYSE:PG), The Coca-Cola Company (NYSE:KO), Philip Morris International Inc. (NYSE:PM) and Wal-Mart Stores, Inc. (NYSE:WMT) gained 1.6%, 1.5%, 1.5%, 1.4%, respectively.
 
Materials stocks dropped the most among the S&P 500 industry groups and the Materials SPDR (XLB) lost 0.5%. Stocks such E I Du Pont De Nemours And Co (NYSE:DD), the Dow Chemical Company (NYSE:DOW), Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), Praxair, Inc. (NYSE:PX) lost 0.6%, 1.0%, 0.5%, 1.0% respectively.

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