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Signs that inflation was under control and manufacturing was picking up pace was of little help to the markets as they closed nearly flat on Wednesday. While the Street awaits the return of investors from their summer holidays, the trend of low volumes continued even yesterday. Among the individual sectors, the housing stocks showed an upward rally boosted by encouraging data.
The Dow Jones Industrial Average (DJI) slipped a mere 0.06% to close at 13,164.78. The Standard & Poor 500 (S&P 500) inched up 1.60 points or 0.1% to finish yesterday’s trading session at 1,405.53. The tech-laden Nasdaq Composite Index gained 0.5% and ended at 3,030.93. The fear-gauge CBOE Volatility Index (VIX) dropped 1.5% to settle at 14.63. Consolidated volumes on the New York Stock Exchange, Nasdaq and American Stock Exchange were roughly 4.79 billion shares, sharply lower than last year's daily average of 7.84 billion. Advancers outnumbered the declining stocks on the NYSE; as for 61% stocks that gained, 36% stocks closed lower.
A slew of economic readings came out yesterday and the majority of them signaled an economic recovery. To begin with, the Board of Governors of the Federal Reserve reported that industrial production increased 0.6% in July, better than consensus estimates of a rise of 0.5%. The growth in industrial production was also far ahead of the 0.1% increase both in May and June. A growth in industrial production is a very positive sign. Being a measure of actual volume of output in a goods-producing industry uninfluenced by prices, industrial production is one of the more important economic indicators.
Separately, a report by the U.S. Bureau of Labor Statistics reported Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in July. Higher food prices were offset by a 0.3% fall in the energy index. Excluding food and energy, the index edged up 0.1% in July, lower than consensus estimates of 0.2%. This also marked a change from the 0.2% rise that the index has experienced the last four times. Thus, the report suggested that inflation was under control.
However, the Empire State Manufacturing Survey by the Federal Reserve Bank of New York was not as encouraging. According to the report: “The general business conditions index slipped below zero for the first time since October 2011, falling thirteen points to -5.9. At -5.5, the new orders index was below zero for a second consecutive month, and the shipments index fell six points to 4.1”. The reading of a negative 5.9% was in sharp contrast to consensus estimates of a reading of 7.2%.
While the day was largely dominated by economic data, another economic report from the National Association of Home Builders (NAHB) helped lift housing stocks. The NAHB/Wells Fargo Housing Market index jumped to 37 in August, up from 35 in last month, the highest level since February 2007. Following the report, the SPDR S&P Homebuilders (XHB) gained 0.3% and stocks including M.D.C. Holdings, Inc. (NYSE:MDC), Lennar Corporation (NYSE:LEN), M/I Homes Inc (NYSE:MHO) and PulteGroup, Inc. (NYSE:PHM) gained 0.1%, 0.2%, 2.2% and 0.6%, respectively.
The day also witnessed earnings releases by certain key companies. Deere & Company’s (NYSE:DE) quarterly earnings missed estimates owing to the global economic slowdown. The company also lowered its sales forecast for the year. Eventually, its shares slumped 6.3%. Separately, Staples, Inc. (NASDAQ:SPLS) slumped 14.6%, missing the Street’s estimates while earnings also declined from year-ago levels. However, another retailer, Abercrombie & Fitch Co. (NYSE:ANF) jumped almost 9% with its quarterly results easily outpacing estimates. Target Corporation’s (NYSE:TGT) results also exceeded estimates and the retailer upped its yearly outlook. Shares were up 1.8%.
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