Positive investor sentiment evaporated after a Federal Reserve Bank official said the central bank might taper the bond purchase program from September, provided economic indicators continued to improve. On the international front, China showed signs of economic stability after factory growth improved for the month of July. France’s industrial output declined for June indicating a lack of economic growth. Among the top ten S&P 500 industry groups, materials sector was the only gainer. Utilities stocks suffered maximum losses.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.
The Dow Jones Industrial Average (DJI) lost 0.5% to close the day at 15,425.51. The S&P 500 decreased 0.4% to finish Friday’s trading session at 1,691.42. The tech-laden Nasdaq Composite Index slipped 0.8% to end at 3,660.11. The fear-gauge CBOE Volatility Index (VIX) jumped 5.3% to settle at 13.41. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.3 billion shares, well below 2013’s average of 6.35 billion shares. Advancing stocks outnumbered the decliners. For 49% shares that advanced, 47% declined.
The fate of the bond purchase program has guided markets ever since Bernanke made a statement that the program will be tapered sooner than expected. However, in the second quarter, benchmarks have been supported by robust earnings and positive economic numbers from major foreign economies. Friday’s trading session ended in losses after the president of the Federal Reserve Bank of Dallas, Richard Fisher made comments regarding the bond purchase program. Investor sentiment dampened on Friday after Fisher said on Thursday that the program will likely be winded up in September provided economic numbers keep improving.
On the home front, the U.S. Department of Commerce, sales of merchant wholes sellers, apart from manufacturers’ sales branches and offices, grew at 0.4% for the month of June month over month and 5.6% year over year. Total inventory of the merchant wholesalers dropped marginally at 0.2% compared to the consensus estimates of 0.4%.
On the international front, China’s factory output expanded 9.7% in July. The expansion in factory output indicates that China’s economy may be stabilizing. This growth in factory output is second only to the 9.9% growth achieved in January and February. Among major factors that constitute factory output, power output increased 8.1%, while volume of crude oil processed increased 7.1% compared to 11%, growth in June. These positive follow a 5.1% growth in exports for July and a 10.9% growth in imports.
Meanwhile, industrial output for France contracted by 1.4% in June on a month over month basis. The drop in the industrial production is attributable to a significant decline in electricity production and food production. Even though the country’s economy has witnessed 0.2% growth, it may fail to buoy growth rate in the positive territory for 2013. France’s economy is expected to contract 0.1% for 2013.
The materials sector was the only gainer among the S&P 500 industry groups and the Materials Select Sector SPDR (XLB) gained 0.6%. Stocks such as the Dow Chemical Company (NYSE:DOW), Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), LyondellBasell Industries NV (NYSE:LYB), Air Products & Chemicals, Inc. (NYSE:APD) and International Paper Company (NYSE:IP) gained 3.1%, 2.6%, 0.2%, 0.1% and 0.1%, respectively.
Utilities stocks emerged as the biggest loser on Friday. The Utilities SPDR (XLU) lost 0.7%. Stocks such as Duke Energy Corp (NYSE:DUK), the Southern Company (NYSE:SO), NRG Energy Inc. (NYSE:NRG), American Electric Power Company Inc. (NYSE:AEP) and NextEra Energy, Inc. (NYSE:NEE) declined 0.7%, 0.4%, 2.0%, 1.1% and 0.4%, respectively.