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Stocks ended mixed on the first trading day of the fourth quarter as positive manufacturing data was somewhat offset by discouraging comments from the central bank chairman. Benchmarks started the day on a winning note boosted by a surprise jump in manufacturing sector activity. However, a chunk of the gains were eroded after Federal Reserve Chairman Ben Bernanke suggested that the rate of growth might be “insufficient to put people back to work”.

The Dow Jones Industrial Average (DJI) gained 0.6% and closed at 13,515.11. The Standard & Poor 500 (S&P 500) rose 0.3% and finished yesterday’s trading session at 1,444.49. The tech-laden Nasdaq Composite Index closed at 3,113.53, after falling 0.1%. The fear-gauge CBOE Volatility Index (VIX) added 3.8% to settle at 16.32. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and the Nasdaq were roughly 6.3 billion shares, marginally lower than the year-on-year daily average volume of 6.38 billion. The advancers on the New York Stock Exchange outpaced the declining stocks; as for 60% stocks that gained, 37% stocks closed lower.

The initial spark for the day was provided by a report from the Institute for Supply Management (ISM) that said economic activity in the manufacturing sector had expanded for the first time since May. An increase in new orders and employment drove the manufacturing sector higher in September. According to the ISM, “The PMI registered 51.5 percent, an increase of 1.9 percentage points from August's reading of 49.6 percent, indicating a return to expansion after contracting for three consecutive months. The New Orders Index registered 52.3 percent, an increase of 5.2 percentage points from August, indicating growth in new orders after three consecutive months of contraction”. For the first time in four months the PMI registered a reading above 50. The report noted: “A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting”. Consensus estimates had projected the figure to come in at 49.9%.

Separately, PMI data was also released for China and the Euro-zone. The euro zone PMI for September was revised upward to 46.1 from its earlier reading of 46. The August reading for the same was 45.1. The PMI readings suggested contraction as it remained below 50. Nonetheless, the euro rose against the dollar by 0.3% following the paltry improvement in the region’s PMI. Separately, China's official PMI was up from 49.2 in August to 49.8 in September.

Meanwhile, the U.S. Department of Commerce said construction spending had decreased 0.6% from July to a seasonally adjusted annual rate of $837.1 billion in August. This was the biggest decline since July last year and the second consecutive month of declines.

As already mentioned, comments from the Fed Chairman had somewhat dented the markets yesterday. Speaking at the Economic Club of Indiana, Bernanke defended the bond buying plan. However, investor sentiment took a hit when he said the economy is unable to grow at a pace fast enough to reduce the high level of unemployment. He said: “Our concern is not really a recession. Our concern is that growth will continue but at a pace that’s insufficient to put people back to work”.

Separately, investors awaited Moody’s verdict on Spain’s sovereign rating. Moody’s Investors Service has so far left the financial arena apprehensive over whether it will downgrade the country’s sovereign rating to ‘junk’.

However, Moody’s made a statement regarding the quantum of funds that would be required to revive Spanish banks. Previously, consultant Oliver Wyman had said around 59.3 billion euros ($76.3 billion) would be required to revive the Spanish banks. But, Moody’s said that such recapitalization is “credit positive, but may be insufficient.”

Coming to the sectors, Consumer Staples Select Sector SPDR (XLP) was the major gainer, surging 0.7%. Among the stocks, Kraft Foods Inc. (NASDAQ:KFT), Monster Beverage Corp. (NASDAQ:MNST), The Coca-Cola Company (NYSE:KO), Philip Morris International Inc. (NYSE:PM) and The Procter & Gamble Company (NYSE:PG) gained 2.8%, 1.8%, 1.2%, 0.9% and 0.1%, respectively.

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