Benchmarks slipped into the red after investors reduced their holdings of high yielding dividend stocks. On Tuesday, major indices gained following encouraging domestic reports. But yesterday, the absence of any domestic reports meant investors shifted their attention to the uncertainty surrounding the Federal Reserve’s bond purchase program. In the previous week itself, Federal Reserve chairman Ben Bernanke raised concerns over the program which pushed benchmark treasury yields higher. Among the S&P 500 industry groups consumer staples, utilities and health care sectors took a hammering yesterday.
The Dow Jones Industrial Average (DJI) lost 0.7% to close the day at 15,302.80. The S&P 500 decreased 0.7% to finish yesterday’s trading session at 1,648.36. The tech-laden Nasdaq Composite Index slipped 0.6% to end at 3,467.52. The fear-gauge CBOE Volatility Index (VIX) gained 2.4% to settle at 14.83. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.7 billion shares, below 2013’s average of 6.4 billion shares. Declining stocks outnumbered the advancers. For the 21% that advanced, 77% declined.
Benchmarks gains on Tuesday were nullified by yesterday’s losses. On Tuesday major indices gained after the Street received an encouraging report on the housing sector. The report revealed that home prices reached its highest level in the past seven years. Till now in 2013, the Dow Jones, the S&P 500 and the Nasdaq have gained 16.8%, 15.6% and 14.8%, respectively. A series of domestic reports are scheduled to be released tomorrow, the second estimate of the GDP, initial claims and pending home sales.
But on Wednesday investors reduced their holdings of high yielding dividend stocks which they had preferred at the beginning of the year. This was primarily because investors remained unsure about how long the Federal Reserve will continue with its bond buying program. Benchmark treasury yields have increased since the last week and touched its highest level in more than a year. This increase occurred after Federal Reserve Chairman Ben Bernanke provided indications that the bond buying program would be tapered off.
On the earnings front, Michael Kors Holdings Ltd (NYSE:KORS) reported its fourth quarter results. The company’s earnings came in above the Street’s estimates. The company shares gained 3.2% after the announcement of its quarterly results. For the year 2013, the company is aiming for earnings per share of $2.43 to $2.47 and revenue of $2.65 billion to $2.75 billion compared to the Street’s estimates of earnings per share of $2.45 and revenue of $2.82 billion. The company’s Chief Executive John Idol said: “We're encouraged by our sales results to date.”
Consumer staples sector was the biggest loser among the S&P 500 industry groups and the Consumer Staples Select Sect. SPDR (XLP) lost 1.9%. Stocks such as The Procter & Gamble Company (NYSE:PG), The Coca-Cola Company (NYSE:KO), Philip Morris International Inc. (NYSE:PM), Wal-Mart Stores, Inc. (NYSE:WMT) and CVS Caremark Corporation (NYSE:CVS) lost 2.4%, 2.7%, 1.2%, 1.4% and 1.6%, respectively.
Health care stocks also took beating yesterday and the Health Care SPDR (XLV) lost 1.6%. Stocks such as Johnson & Johnson (NYSE:JNJ), Eli Lilly & Co. (NYSE:LLY), GlaxoSmithKline plc (NYSE:GSK), Abbott Laboratories (NYSE:ABT) and Merck & Co., Inc. (NYSE:MRK) decreased 2.2%, 1.5%, 3.0%, 2.2% and 1.6%, respectively.