Investor apprehensions about Syria and discouraging consumer spending numbers dragged the major indices into negative territory on Friday. The S&P 500 ended the month of August on a low note, posting its biggest monthly fall since May 2012. The Street received a number of domestic reports. Business activity in the U.S. Midwest improved for the month of August. On the discouraging side, consumer sentiment fell for the same month. Consumer discretionary stocks were the worst performers among the S&P 500 industry groups. The consumer staples sector was the biggest gainer.
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The Dow Jones Industrial Average (DJI) lost 0.2% to close the day at 14,810.31. The S&P 500 slipped 0.3% to finish Friday’s trading session at 1,632.97. The tech-laden Nasdaq Composite Index decreased 0.8% to end at 3,589.87. The fear-gauge CBOE Volatility Index (VIX) gained 1.2% to settle at 17.01. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 3.99 billion shares, well below 2013’s average of 6.31 billion shares. Declining stocks outnumbered the advancers. For 67% shares that declined, only 30% advanced.
Benchmarks have enjoyed a big rally this year which has been affected in recent days. There is no doubt that investors are concerned about the future of the Federal Reserve’s massive bond buying program. But what happened in Syria dampened investor sentiment further in recent days. President Barack Obama said he is yet to make a final decision on a military attack on Syria. These concerns pushed the markets lower in the month of August. The Dow Jones declined 4.4% and the S&P 500 fell 3.1% over the month of August.
The U.S. Department of Commerce reported personal spending numbers. According to the report, personal consumption expenditures increased 0.1% to $16.3 billion in July after increasing 0.6% in the previous month. July’s increase was below the consensus estimate of an increase of 0.3%. On the other hand, personal income gained 0.1% to $14.1 billion. Lower-than-expected personal spending numbers gives an indication that the U.S has started the second half of the year on a low note. PCE Inflation increased 0.1% in July after increasing 0.4% in the previous month.
The Street also received some positive economic reports. According to the Institute for Supply Management, Chicago business activity increased in the Midwest in August. The Chicago Business Barometer increased to 53.0 in August from the previous month’s figure of 52.3, in line with the consensus estimate. The improvement in business activity was primarily driven by gains in order backlogs and news orders. Production, employment and supplier deliveries all declined in August but still remained above 50. American consumer sentiment declined in the month of August. According to the Thomson Reuters/University of Michigan, the index fell to 82.1 in August from July’s final figure of 85.1. But the final reading of 82.1 was above the preliminary estimate of 80.0 and consensus estimate of 80.7.
The consumer discretionary sector was the worst performer among the S&P 500 industry groups and the Consumer Discretionary SPDR (XLY) lost 0.6%. Stocks such as The Walt Disney Company (NYSE:DIS), News Corp (NASDAQ:NWSA), Time Warner Inc (NYSE:TWX), Comcast Corporation (NASDAQ:CMCSA) and CBS Corporation (NYSE:CBS) slipped 0.4%, 0.4%, 0.7%, 0.8% and 0.9%, respectively.
Consumer staples stocks were the biggest gainer among the S&P 500 industry groups. The Consumer Staples Select Sect. SPDR (XLP) gained 0.3%. Stocks such as The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), Wal-Mart Stores, Inc. (NYSE:WMT), Costco Wholesale Corporation (NASDAQ:COST) and Target Corporation (NYSE:TGT) added 0.8%, 0.9%, 0.8%, 0.4% and 0.3%, respectively.