Markets slipped into the red following dismal reports on the home front coupled with investor concerns about the future of the Federal Reserve’s bond buying program. Investors are hesitant to take any positions ahead of the all-important Federal Reserve policy meeting this week. Meanwhile, industrial production for the month of May came in flat. Financial sector was the biggest loser among the S&P 500 industry groups. Utilities stocks were the only gainers.
The Dow Jones Industrial Average (DJI) lost 0.7% to close the day at 15,070.18. The S&P 500 slipped 0.6% to finish Friday’s trading session at 1,626.73. The tech-laden Nasdaq Composite Index fell 0.6% to end at 3,423.56. The fear-gauge CBOE Volatility Index (VIX) jumped 4.5% to settle at 17.15. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.5 billion shares, considerably lower than the 2013’s average of 6.38 billion shares. Declining stocks outnumbered the advancers. For the 45% that advanced, 53% declined.
Markets were volatile last week following concerns over the Federal Reserve’s bond buying program. The Dow lost 1.2%, the S&P 500 slipped 1% and the Nasdaq declined 1.3%, over the week. The Federal Reserve is buying bonds worth $85 billion every month to keep interest rates low. This program was implemented to boost borrowing, spending and investing to bring the country back on the road to recovery. The Fed’s easy monetary policy has pushed major indices higher this year. But after Fed chairman Ben Bernanke’s testimony on May 22, markets started losing their ground. Investors are of the view that if the Fed tapers the bond buying program, growth of the economy may be affected. The Federal Reserve’s two-day policy meeting will be held on Tuesday. All eyes are fixed on the outcome of this meeting.
Meanwhile, according to Thomson Reuters and the University of Michigan, the preliminary estimate of consumer sentiment dropped to 82.7 in June from previous month’s figure of 84.5. This was considerably below the consensus estimate of 84.4. In the previous month, the index was its highest level since July 2007. On the other hand the U.S. Bureau of Labor Statistics reported that Producer Price Index increased 0.5% in May. This was above the consensus estimate of an increase of 0.1%.
Additionally, industrial production was flat in May after having declined 0.4% in April. This was contrary to the consensus estimate of an increase of 0.2%. Manufacturing production increased 0.1% in May whereas output from mines gained 0.7%. Increase in manufacturing production and mining was overshadowed by a fall in the output of utilities.
The financial sector had a bad day and was the biggest loser among the S&P 500 industry groups. The Financial Select Sector SPDR (XLF) lost 1.3%. Stocks such as JPMorgan Chase & Co. (NYSE:JPM), Goldman Sachs Group Inc (NYSE:GS), Bank of America Corp (NYSE:BAC), Citigroup Inc (NYSE:C) and Wells Fargo & Co (NYSE:WFC) declined 1.9%, 1.8%, 1.1%, 2.1% and 1.9%, respectively.
The utilities sector was the only sector among the S&P 500 industry groups which finished in the green. The Utilities SPDR (XLU) gained 0.2%. Stocks such as Duke Energy Corp (NYSE:DUK), NextEra Energy, Inc. (NYSE:NEE), Public Service Enterprise Group Inc. (NYSE:PEG), Edison International (NYSE:EIX) and CenterPoint Energy, Inc. (NYSE:CNP) added 0.2%, 0.8%, 0.2%, 0.9% and 0.4%, respectively.