Staying true to expectations, the Federal Reserve refrained from tapering the $85 billion bond buyback plan but its bearish growth outlook dragged benchmarks into the red. The S&P 500 snapped its record run, as some experts cited profit booking to be one of the factors for the southward move. Moreover, September’s Consumer Price Index grew marginally and the ADP employment report for October lagged estimates. All S&P 500 industry groups finished in negative territory and consumer staples stocks suffered the most.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street
The Dow Jones Industrial Average (DJI) slipped 0.4% to close the day at 15,618.76. The S&P 500 declined 0.5% to finish yesterday’s trading session at 1,763.31. The tech-laden Nasdaq Composite Index fell 0.6% to end at 3,930.62. The fear-gauge CBOE Volatility Index (VIX) added 1.8% to settle at 13.65. Consolidated volumes on the New York Stock Exchange were 3.55 billion shares. Declining stocks outnumbered the advancers. For 68% shares that declined, only 29% advanced.
As expected, the Federal Reserve decided not to taper its $85 billion bond buying program due to a series of weak domestic reports in recent days. But what disappointed investors was its growth outlook for the economy. The central bank said even though it will continue with its stimulus program at its current pace, for the time being the growth outlook is not encouraging. Market experts said the Fed’s statement this time were not as “dovish” as expected. The Federal Open Market Committee said: “Available data suggests that household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months.”
According to the US Department of Labour, the Consumer Price Index (CPI) for the month of September grew marginally, by 0.2%, in line with the consensus estimate. All the major energy component indexes rose during the month, leaving the food index unchanged. The all items index increased 1.2% over the year, the smallest 12 month increase since April. The index for all items less food and energy grew 1.7% while shelter and medical care indexes both increased 2.4%. The food index increased 1.4% whereas the energy index has dropped 3.1%.
Separately, the ADP employment report for October reported that the U.S. non farm private sector added 130,000 jobs. This was below the expected increase of 150,000. Small business added 37,000 jobs, 13,000 jobs were added in medium business and 81,000 additions were made in large business.
On the earnings side, General Motors Company (NYSE:GM) came out with better-than-expected third quarter results. Adjusted earnings of $1.6 billion or 96 cents per share in the third quarter outpaced the Zacks Consensus Estimate of 91 cents per share. However, on a reported basis, net income dropped 53% after including a net loss of $0.9 billion or 51 cents per share from special items in the reported quarter. Shares jumped more than 3% after the company announced its quarterly results.
Also, LinkedIn Corp.’s (NYSE:LNKD) third quarter earnings beat the Street’s expectations. However, it reported a $3.4 million net loss in the quarter compared to net income of $2.3 million a year ago. Following the earnings release on Tuesday, shares of LinkedIn dropped over 9% yesterday.
The Consumer Staples sector was the biggest loser among the S&P 500 industry groups and the Consumer Staples SPDR (XLP) lost 0.9%. Stocks such as the Procter & Gamble Company (NYSE:PG), The Coca-Cola Company (NYSE:KO), Philip Morris International Inc. (NYSE:PM), Wal-Mart Stores, Inc. (NYSE:WMT) and CVS Caremark Corporation (NYSE:CVS) declined 1.1%, 0.5%, 1.1%, 0.2%, 0.5%, respectively.