Benchmarks eked out gains on the back of better than expected economic reports. However, investors remained cautious over a possible military strike on Syria and the possibility of the Fed tapering the bond purchase program. Investor confidence was boosted by better than expected initial claims data and robust service sector data. Of the top ten S&P 500 industry groups, energy stocks gained the most while utilities suffered maximum losses.
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The Dow Jones Industrial Average (DJI) gained 0.04% to close the day at 14937.48. The S&P 500 added 0.1% to finish yesterday’s trading session at 1655.08. The tech-laden Nasdaq Composite Index increased 0.3% to end at 3658.785. The fear-gauge CBOE Volatility Index (VIX) declined 0.7% to settle at 15.77. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.3 billion shares, below 2013’s average of 6.3 billion shares. Declining stocks outnumbered the advancers. For 50% shares that declined, 47% advanced.
A series of positive economic reports were released yesterday which boosted investor sentiment. However, on the back of these encouraging reports, the probability that the $85 billion bond purchase program would soon be tapered also increased. As a result, gains were trimmed during the later part of the day. While the ISM services index for August rose at the fastest rate in more than eight years, initial claims data decreased to its lowest point in five years. Speculation over tapering of the bond purchase program also pushed the 10-year Treasury rate to nearly 3%.
According to the U.S. Department of Labor, number of Americans filing for unemployment claims reduced to 323,000. This below last week’s figure of 332,000 and the consensus estimates of 330,000.On a 4-week moving average basis the figure declined 3,000 to 328,500 compared to previous week’s figure of 331,500. This figure is also the lowest level attained in the past 5 years.
According to the ADP National Employment Report, 176,000 U.S. nonfarm private sector jobs were added for the month of August. Small, medium business and large business added 71,000, 74,000 and 32,000, respectively. The addition in employment was almost in line with the consensus estimate. However, it is lower than previous month’s figure of 200,000.
The ISM non-manufacturing index came in at 58.6% for August. This is 2.8% points above previous month’s index of 56% and consensus estimates of 55.3%. The non-manufacturing business activity increased 1.8% points to 62.2% while New Orders index and Employment index increased 2.8% percentage points and 3.8% points to 60.5% and 57%, respectively. Of the 11 constituents which make up for the services sector, only the Prices and Inventory sentiment indices witnessed a fall.
Meanwhile, according to the U.S. Department of Commerce, new orders in July for manufactured goods decreased 2.4% to $485.0 billion. Shipments increased 1.1% or $5.3 billion while unfilled orders and inventories edged up 0.4% and 0.2%. New orders for manufactured durable goods declined 7.4% to $226.3 billion. This is in sharp contrast to previous month’s decline of 3.9%. However, new orders of nondurable goods increased 2.4%.
The Bloomberg consumer confidence index dropped for the fourth straight week to -32.3. A decline in opinion of Americans on the state of the economy and a weak buying climate is responsible for the drop in consumer confidence index. Americans’ view on the state of economy dropped to -55.3 from previous week’s reading of -55.1. The barometer measuring the buying climate dropped to -40.6. This figure is weaker than June’s reading of -38.7. An imminent attack on Syria by the U.S. and rising mortgage rates has dampened investor sentiment, as a result of which the consumer confidence has dropped.
The energy sector gained the most during yesterday’s trading session. The Energy Select Sector SPDR (XLE) gained 0.3%. Stocks such as Schlumberger Limited (NYSE:SLB), National-Oilwell Varco, Inc. (NYSE:NOV), Anadarko Petroleum Corporation (NYSE:APC), Chevron Corporation (NYSE:CVX) and EOG Resources Inc (NYSE:EOG) gained 1.6%, 1.9%, 0.6%, 0.4% and 0.6%, respectively.
Utilities stocks suffered maximum losses. The Utilities SPDR (XLU) lost 0.4%. Stocks such as Dominion Resources, Inc. (NYSE:D), NextEra Energy, Inc. (NYSE:NEE), American Electric Power Company Inc (NYSE:AEP), Public Service Enterprise Group Inc. (NYSE:PEG) and The Southern Company (NYSE:SO) lost 0.2%, 0.2%, 0.2%, 0.3% and 0.3%, respectively.