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Mixed domestic reports along with discouraging economic data from China dragged the major indices into negative territory. Weaker-than-expected corporate results also added to negative investor sentiment. These developments offset the optimism created by the Federal Reserve’s decision to continue with its current monetary policy. All the top ten S&P 500 industry groups suffered losses among which materials stocks suffered the most. 

The Dow Jones Industrial Average (DJI) decreased 0.9% to close the day at 14,700.95. The S&P 500 lost 0.9% to finish yesterday’s trading session at 1,582.70. The tech-laden Nasdaq Composite Index dropped 0.9% to end at 3,299.13. The fear-gauge CBOE Volatility Index (VIX) gained 7.2% to settle at 14.49. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.53 billion shares, above 2013’s average of 6.36 billion shares. Declining stocks outnumbered the advancers. For the 27% that advanced, 70% declined.

Major indices retreated following discouraging employment data. According to data released by Automatic Data Processing (NASDAQ:ADP), 119,000 jobs were added in April, of which 50,000 jobs were added by small businesses. 26,000 and 43,000 jobs were added by medium and large businesses, respectively. These figures indicate the rate of hiring was at its slowest pace since September 2012.

A separate report from the U.S. Department of Commerce indicated a decline in construction spending in the month of March compared to February. Construction spending in March dropped by 1.7% compared to the consensus estimate of an increase of 0.6%. Meanwhile, according to a report released by the Nasdaq, sales of domestic vehicles slowed marginally to 11.9 million versus the consensus estimate of 12.0 million. Total vehicles sales were reported at 14.9 million in comparison to the consensus estimate of 15.3 million.

According to the Institute for Supply Management, the Purchasing Manager’s Index (PMI) expanded for the fifth month in a row. The PMI index was at 50.7%, down from previous month’s figure of 51.3%. This data was also lower than the consensus estimate of 51%. Among the important industries, new orders index increased 0.9%, production index increased 1.3%, employment index decreased 4% and prices index decreased 4.5% in comparison with March.

Tepid PMI data from China further dampened investor sentiment. China’s official PMI index for the month of April was 50.6, lower than the March 2012 figure of 50.9. A low PMI index is primarily attributable to the weak new orders export data. Investor optimism, which gained strength during fourth quarter of 2012, is witnessing a paradigm shift. Weaker-than-expected growth in the U.S. economy, high unemployment in the Euro Zone area and sluggishness in China’s growth is largely responsible for the shift.

These discouraging reports offset the optimism which could have been created by Federal Reserve’s decision to continue with its monetary measures. At the end of the Federal Reserve’s meeting, no major changes were implemented, except for the fact that the pace of bond purchases will vary depending on the economic situation.

According to the Federal Open Market Committee (FOMC), “The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes.”

On the earnings front, shares of Mastercard Inc. (NYSE:MA) dropped 2.4% after its revenue fell short of the Street’s estimates. The company reported revenue at $1.9 billion, up 8% year over year, but below estimates of $1.93 billion. According to Thomson Reuters, about 342 S&P 500 companies have released earnings of which 68.7% have beaten the Street’s expectations and 43.2% have registered revenues above estimates.

Of the top ten S&P 500 industry groups, materials stocks were the biggest losers. The Materials Select Sector SPDR (XLB) lost 1.8%. Stocks such as Monsanto Company (NYSE:MON), the Dow Chemical Company (NYSE:DOW), E I Du Pont De Nemours And Co (NYSE:DD), FMC Corp (NYSE:FMC) and Praxair, Inc. (NYSE:PX) lost 2.0%, 2.2%, 2.1%, 3.8% and 1.0%, respectively.

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Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
ANI PHARMACE ANIP 29.57 +15.73%
ALLIANCE FIB AFOP 17.94 +3.58%
ATLAS FINANC AFH 14.67 +3.02%
GENTHERM INC THRM 36.59 +2.05%
FEDERATED NA FNHC 20.26 +1.96%