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Investors grew cautious on Monday owing to fears over a correction and a Federal Reserve official’s comments on monetary stimulus. Encouraging developments on corporate acquisitions could not prevent benchmarks from slumping into negative territory. Among the top ten S&P 500 industry groups, energy stocks gained the most. Consumer staples stocks emerged as the biggest loser.
The Dow Jones Industrial Average (DJI) lost 0.1% to close the day at 15,335.28. The S&P 500 slipped 0.1% to finish yesterday’s trading session at 1,666.29. The tech-laden Nasdaq Composite Index lost 0.1% to end at 3,496.43. The fear-gauge CBOE Volatility Index (VIX) gained 4.6% to settle at 13.02. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6 billion shares, marginally below 2013’s average of 6.36 billion shares. Advancing stocks outnumbered the decliners. For the 57% that advanced, 40% declined.
Monday’s trading session saw benchmarks garnering small profits and gains though they ultimately ended marginally in the red. Markets started on a positive note following news of corporate acquisitions. Investor sentiment received a boost when Yahoo! Inc. (NASDAQ:YHOO) decided to purchase blogging company Tumblr for $1.1 billion. Additionally, Actavis Inc. (NYSE:ACT) inked a stock-for-transaction $5 billion deal with Warner Chilcott Plc. (NASDAQ:WCRX). On the back of these developments, the Dow Jones and the S&P 500 reached all-time intra-day highs. Both indices have increased 17%, since the start of 2013. Since 1990, this is the first time that 38% of the S&P 500 stocks have touched a 52-week high in a week.
Investor sentiment received a blow when the president of the Federal Reserve Bank of Chicago, Charles Evans, hinted that monetary stimulus would end. Evans said there are chances of ending monetary stimulus by autumn if the labor market keeps improving at the prevailing rate. These comments came in a week after the president of the Federal Reserve of San Francisco, John Williams made similar comments.
On Wednesday, Ben Bernanke, the chairman of the Federal Reserve, will give testimony in front of the Congress regarding the monetary stimulus. Minutes of its most recent meeting will also be disclosed, providing further clarity on monetary stimulus. There are chances that the bond-buying program will end sooner than investors expect.
On the international front, Japan’s Ministry of Finance is due to release its report on exports and imports for April on Wednesday. The ministry expects exports to rise on the back of strong demand for electronics and shipments of cars to the U.S. However, the ministry expects high imports to offset gains from exports. They also expect the trade deficit for April to be high for the 10th consecutive month owing to high imports. Recently, Japan registered a GDP growth of 0.9% following fiscal measures taken to revive the economy and boost investments.
Energy stocks were the biggest gainers. The Energy Select Sector SPDR (XLE) gained 1.2%. Stocks such as Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), Hess Corp. (NYSE:HES), Occidental Petroleum Corporation (NYSE:OXY) and Marathon Petroleum Corp (NYSE:MPC) increased 0.8%, 1.1%, 0.1%, 0.9% and 2.3%, respectively.
Consumer Staples stocks were the biggest losers. The Consumer Staples Select Sect. SPDR (XLP) lost about 1.0%. Stocks such as the Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), the Coca-Cola Company (NYSE:KO), Wal-Mart Stores, Inc. (NYSE:WMT) and CVS Caremark Corporation (NYSE:CVS) lost 1.2%, 0.8%, 1.4%, 0.6% and 0.8%, respectively.