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A discouraging report on the manufacturing sector dragged major indices lower on Monday. In the previous week the S&P 500 had touched a new high but could not sustain that level yesterday. Meanwhile, construction spending increased in the month of February. But this encouraging development could not act as a catalyst to investor sentiment. Industrial stocks took a hammering following the dismal manufacturing report and were the biggest loser among the S&P 500 industry groups. The health care sector was the lone gainer.          

The Dow Jones Industrial Average (DJI) lost 0.04% to close the day at 14,572.85. The S&P 500 fell 0.5% to finish yesterday’s trading session at 1,562.17. The tech-laden Nasdaq Composite Index declined 0.9% to end at 3,239.17. The fear-gauge CBOE Volatility Index (VIX) jumped 6.9% to settle at 13.58. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.16 billion shares, significantly lower than 2012’s daily average of 6.45 billion shares. Declining stocks outnumbered the advancers. For the 66% that declined, 31% advanced.

The Street ended the first trading session of the month on a discouraging note. This is in sharp contrast to last week, when the S&P 500 touched a new all time high and logged its best quarterly performance in a year. Benchmarks have enjoyed a decent rally in the first three months of the year. The S&P 500 gained 9.5%, the Dow Jones added 11.2% and the Nasdaq increased 7.3% in 2013. According to experts, market movement will slow down before the all important monthly payrolls numbers which is scheduled to be released on Friday.    

On the domestic front, a discouraging report on the manufacturing sector dampened investor sentiment. According to the Institute for Supply Management, the manufacturing index declined to 51.3 in March from the prior month’s reading of 54.2. This was below the consensus estimate of 54.2. The manufacturing sector has expanded for the fourth month in a row, but at a slower rate. A reading above 50 indicates expansion in the sector. New orders fell to 51.4 from 57.8 whereas the production index declined to 52.2 from February’s figure of 57.6. On an encouraging side, the employment index rose to 54.2 from 52.6.     

According to the U.S. Census Bureau of the Department of Commerce, construction spending increased in February. The report revealed that construction spending in February increased at a seasonally adjusted annual rate of $885.1billion, 1.2% from previous month’s revised estimate of $874.8 billion. This was above the consensus estimate of 0.9%. Spending on private construction edged up 1.3% whereas spending on public construction increased 0.9%.  
             
The industrial sector was the biggest loser among the S&P 500 industry groups and the Industrial Select Sector SPDR (XLI) lost 1.2%. Stocks such as General Electric Company (NYSE:GE), United Technologies Corporation (NYSE:UTX), Union Pacific Corporation (NYSE:UNP), 3M Co (NYSE:MMM) and Honeywell International Inc. (NYSE:HON) declined 0.2%, 0.6%, 1.6%, 0.6% and 1.4%, respectively.

Nine out of the ten sectors in the S&P 500 industry groups ended lower. The health care sector was the only gainer and the Health Care SPDR (XLV) gained 0.3%. Stocks such as Merck & Co., Inc. (NYSE:MRK), Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA), Johnson & Johnson (NYSE:JNJ), Stryker Corporation (NYSE:SYK) and Actavis Inc (NYSE:ACT) increased 0.3%, 1.2%, 0.5%, 0.1% and 0.4%, respectively.
 

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