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Benchmarks closed in the red on Monday after the World Bank reduced growth estimates for East Asia and the Pacific region. Meanwhile, investors remained apprehensive ahead of the third-quarter earnings season, which will kick off today with Alcoa reporting its results after the closing bell. Eventually, the cautious tone and the Columbus Day holiday led to the lightest trading session for the year. Separately, Euro-zone finance ministers met in Luxembourg and said that no bailout was required for Spain.
The Dow Jones Industrial Average (DJI) lost 0.2% to close the day at 13,583.65. The Standard & Poor 500 (S&P 500) slipped 0.4% to finish yesterday’s trading session at 1,455.88. The tech-laden Nasdaq Composite Index was down 0.8% and ended at 3,112.35. The fear-gauge CBOE Volatility Index (VIX) added 5.4% to settle at 15.11. Consolidated volumes on the New York Stock Exchange, American Stock Exhange and Nasdaq were roughly 4.1 billion shares, significantly lower than the year-to-date average of 6.54 billion shares. The declining stocks outpaced the advancers on the NYSE; as for 58% stocks that dropped, 38% stocks moved higher. The U.S. government and bond markets remained closed for the Columbus Day holiday, resulting in low volumes.
Markets opened following news that the World Bank has slashed growth forecasts for East Asia and the Pacific region. The World Bank now forecasts a growth rate of 7.2% for China and Asia-Pacific countries, down from the 7.6% projected in May this year. Moreover, the World Bank was bearish about China, the world’s second largest economy, and noted that the slowdown would be far worse than what is being anticipated. The European debt crisis has hindered China’s growth story.
Meanwhile, all eyes are fixed on third-quarter corporate earnings, which will start with Alcoa Inc (NYSE:AA) reporting its results after the market closes today. Markets have enjoyed a decent run in the recent past, mostly spurred by the announcement of the third round of quantitative easing. Benchmarks have rallied to reach multi-year highs. However, corporate earnings will play a crucial role this time, as they would possibly decide whether benchmarks are able to sustain the winning momentum. However, not many analysts are upbeat about the earnings season this time around.
In fact, uncertainty about the upcoming earnings season intensified after bellwethers such as FedEx Corporation (NYSE:FDX), Caterpillar Inc. (NYSE:CAT) and Hewlett-Packard Company (NYSE:HPQ) slashed their earnings estimates. FedEx is now expecting 2013 earning per share within the range of $6.20-$6.60, down from $6.90-$7.40. Meanwhile, Caterpillar has revised its 2015 earning estimates to $12 to $18 per share, down from the earlier range of $15 to $20 a share. Hewlett-Packard is anticipating adjusted earnings in the range of $3.40 to $3.60 per share for fiscal 2013. The weak global economic situation has hampered the growth of these companies.
On the international front, European finance ministers met in Luxembourg to discuss Spain’s bailout. After the meeting, Euro-zone finance ministers said Spain’s steps to overhaul its economy have eliminated the need for any bailout at least at this point of time.
Coming to the sectors, technology had a bad run yesterday. Tech bellwether Apple (NASDAQ:AAPL) lost 2.21%. Other stocks such as Hewlett-Packard Company (NYSE:HPQ), Microsoft Corporation (NASDAQ:MSFT), Google Inc (NASDAQ:GOOG) and SanDisk Corporation (NASDAQ:SNDK) lost 1.8%, 0.2%, 1.3% and 0.8% respectively.
While most of the sectors closed in the red at the end of yesterday’s trading session, the energy sector secured a finish in the green. Energy stocks such as Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), BP plc (NYSE:BP), Statoil ASA (NYSE:STO) and Petroleo Brasileiro Petrobras SA (NYSE:PBR) gained 0.1%, 0.1%, 0.3%, 0.4% and 0.6%, respectively.