Benchmarks eked out gains after a Federal Reserve official clarified doubt on monetary stimulus on Tuesday. The lack of catalysts resulted in the absence of any major movement in the benchmarks. Meanwhile, Japan recorded below-than-expected export figures for the month of April. Of the top ten S&P 500 industry groups, health care stocks gained the most. Technology shares suffered maximum losses.
The Dow Jones Industrial Average (DJI) gained 0.3% to close the day at 15,387.58. The S&P 500 increased 0.2% to finish yesterday’s trading session at 1,669.16. The tech-laden Nasdaq Composite Index rose 0.2% to end at 3,502.12. The fear-gauge CBOE Volatility Index (VIX) gained 0.4% to settle at 13.37. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.15 billion shares, marginally below 2013’s average of 6.36 billion shares. Advancing stocks outnumbered the decliners. For the 53% that advanced, 43% declined.
Major indices have yet again touched all-time highs. Benchmarks have gained more than 16% from the start of 2013. Yesterday, the president of New York Federal Reserve, William Dudley commented on tapering off the monetary stimulus program. Dudley said he cannot confirm if the Federal Reserve will continue with or end the monetary stimulus. Whether bond purchases continue or not depends entirely on the future economic situation. Apart from a few reports, economic numbers released in the second quarter have been negative or flat. It is uncertain as to which route the economy will take in the future. However, Dudley did say that the pace of the bond-buying program might be increased or decreased.
These developments came just a day ahead of Ben Bernanke’s testimony due tomorrow at Capitol Hill. Tomorrow’s trading session is expected to be dominated by the Fed Chairman’s testimony. This will probably provide the catalyst which the markets are looking for.
Meanwhile, the president of Federal Reserve of St. Louis, James Bullard, suggested the European Central Banks’s should adapt an “aggressive quantitative easing program”. He added that the situation in Europe posed the same risks of deflation and low growth, which was suffered by Japan at one point of time. The Euro Zone is in poor financial shape as its Gross Domestic Product (GDP) declined 0.2% with most Euro Zone members still in recession. Commenting on the low inflation and growth rate, Bullard said: “You want to be pretty sure that you don’t get stuck in that situation, and one way to get stuck would be to be passive in this situation and not take some aggressive action to try to get inflation back.”
On the international front, Japan registered weaker-than-expected export data in April. Exports grew at 3.8% compared to the estimates of 5.9%. However, on a month-over-month basis, exports grew more than 1.1% which was registered in March. The third largest economy in the world reported a marginal rise in exports to China at 0.3%. But exports to the U.S. surged 14.8% year over year.
The growth in the exports was offset by a weaker Yen and increasing imports. Imports surged 9.4% year over year on the back of strong imports of liquefied natural gas. The growth in imports was higher than estimates of 6.7%. The country’s trade balance widened to a deficit of 879.9 billion yen, the biggest gap observed in April since 1979. This deficit is much wider than estimates of 621.1 billion yen.
Health care stocks gained the most. The Health Care SPDR (XLV) gained about 1.1%. Stocks such as Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), Amgen, Inc. (NASDAQ:AMGN), Zimmer Holdings, Inc. (NYSE:ZMH) and Merck & Co., Inc. (NYSE:MRK) gained 0.7%, 0.3%, 2.0%, 0.3% and 4.7%, respectively.
Technology shares were the biggest losers. Technology SPDR (XLK) lost 0.3%. The Stocks such as Apple Inc. (NASDAQ:AAPL), Hewlett-Packard Company (NYSE:HPQ), Microsoft Corporation (NASDAQ:MSFT), Google Inc. (NASDAQ:GOOG) and Red Hat Inc. (NYSE:RHT) lost 0.7%, 0.3%, 0.7%, 0.2% and 1.5%, respectively.