Investor concerns over domestic and international growth and mixed earnings reports dragged benchmarks into negative territory. On Wednesday, bearish sentiments gained strength after the Fed signaled it may stop or slow regular bond buying. Benchmarks finished in the red for the second consecutive day and the S&P 500 logged its biggest two-day loss since November 2012. Meanwhile, initial claims surged in the previous week, bucking the trend. The consumer staples sector was the lone gainer among the S&P 500 industry groups while the materials was the biggest loser.
The Dow Jones Industrial Average (DJI) decreased 0.3% to close the day at 13,880.62. The S&P 500 decreased 0.6% to finish yesterday’s trading session at 1,502.42. The tech-laden Nasdaq Composite Index lost 1.0% to end at 3,131.49. The fear-gauge CBOE Volatility Index (VIX) increased 3.7% to settle at 15.22. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 7.64 billion shares, well above the daily average of 6.45 billion shares in 2012. Declining stocks outnumbered the advancing stocks. For the 28% that advanced, 69% declined.
On Wednesday, major indices slipped into the red after the Fed signaled it might stop or slow down the process of purchasing $85 billion worth of treasuries and bonds. Yesterday’s trading session was mostly dominated by growth concerns from the U.S. and Europe. The Purchasing Managers’ Index for the Euro Zone fell to 47.3 this month from 48.6 in the previous month. This follows news of French output slipping to its lowest level in nearly four years. According to Foreign Minister Laurent Fabius, growth may shrink to between 0.2% and 0.3% for 2013, from the previously estimated 0.8%.
On the domestic front, the Federal Reserve Bank of Philadelphia’s index which measures manufacturing activity surprisingly dropped to an eight-month low of -12.5 from previous month’s -5.8. New orders index also fell from -4.3, in the previous month, to -7.8. After posting encouraging numbers in recent weeks, seasonally adjusted initial claims increased 20,000 to 362,000 in the previous week. This was well above the estimate of 347,000.
Meanwhile, the National Association of Realtors released existing home sales data which noted a marginal improvement. Existing home sales came in at 4.92 million for January from the revised December figure of 4.9 million. This was slightly above the consensus estimate of 4.9 million. According to Lawrence Yun NAR chief economist “Buyer traffic is continuing to pick up, while seller traffic is holding steady.”
On the earnings front, shares of retail giant Wal-Mart Stores, Inc. (NYSE:WMT) gained 1.5% after it posted encouraging results for the reported quarter, beating the Street’s estimates. Shares of credit-card terminal maker, VeriFone Systems Inc (NYSE:PAY) plunged 42.8% after the company guided the first and second quarter earnings well below the Street’s estimates. The low profits of the company are attributable to sluggishness in the European economy. Meanwhile, shares of electric car maker, Tesla Motors Inc (NASDAQ:TSLA) contracted 8.8% after it posted a loss for the fourth quarter. According to the company, the loss is attributable to high operating costs.
Among the top ten S&P 500 industry groups, consumer staple stocks were the only gainer. The Consumer Staples Select Sect. SPDR (XLP) gained 0.3%. Stocks such as Philip Morris International Inc. (NYSE:PM), Altria Group, Inc. (NYSE:MO), Target Corporation (NYSE:TGT) and Dollar Tree, Inc. (NASDAQ:DLTR) increased 1.1%, 0.9%, 1.2% and 2.9%, respectively.
Materials stocks were the biggest losers among the S&P 500’s groups. The Materials Select Sector SPDR (XLB) lost 0.9%. Shares such as The Dow Chemical Company (NYSE:DOW), Praxair, Inc. (NYSE:PX), Ecolab Inc. (NYSE:ECL), Mosaic Co (NYSE:MOS) and Alcoa Inc. (NYSE:AA) lost 2.5%, 0.4%, 1.1%, 1.3% and 1.1%, respectively.