Benchmarks gained during Tuesday’s trading session on the back of expectations that the Federal Reserve will make “moderate” changes to the $85 billion bond purchase program. Meanwhile, the Consumer Price Index (CPI) for the month of August grew marginally, by 0.1%. On the international front, business sentiment for Asia declined in the third quarter. Of the top ten S&P 500 industry groups utilities gained the most. Materials stocks were the only losers.
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The Dow Jones Industrial Average (DJI) gained 0.2% to close the day at 15,529.73. The S&P 500 increased 0.4% to finish yesterday’s trading session at 1,704.76. The tech-laden Nasdaq Composite Index rose 0.8% to end at 3,745.7. The fear-gauge CBOE Volatility Index (VIX) increased 1.0% to settle at 14.53. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.06 billion shares, below 2013’s average of 6.24 billion shares. Advancing stocks outnumbered the decliners. For 33% shares that declined, 65% advanced.
Benchmarks eked out gains during yesterday’s trading session as investors expect the changes in the bond purchase program to be “moderate”. The meeting of the Federal Open Market Committee that began on Tuesday is expected to decide the fate of the bond purchase program. Apart from continuing to keeping interest rates near-zero, investors expect bond purchases to be reduced by $10 billion to $75 billion per month.
According to the US Department of Labor, the CPI grew marginally by 0.1%. This is below the consensus estimate as well as July’s reading of 0.2%. Although consumer prices hardly changed during August, an increase was witnessed in rents and medical care costs. This increase might support the fact that the bond purchase program should be trimmed. The core CPI also increased 0.1%. On a year over year basis, CPI has increased 1.6% while the core-CPI has increased 1.8%. Rent and medical care costs, which are solely responsible for the increase in CPI and core-CPI, increased 0.3% and 0.6%, respectively.
On the international front, the Thomson Reuters/INSEAD Asia Business Sentiment Index declined to 66 in the third quarter from previous quarter’s reading of 71. The weakest business sentiment was witnessed in the Chinese, South Korean and Taiwanese economies. The shipping and financial sectors were the worst hit. The gauge measuring the financial and shipping sectors both declined to 50, compared to second quarter’s reading of 78 and 80, respectively. Within the Asian region, Japan and the Philippines recorded the strongest reading of 63 and 100, respectively. The weakest sentiment reading came from the Indonesian economy.
On the earnings front, FactSet Research Systems Inc. (NYSE:FDS) declined 1.7% after it posted earnings below the Street’s expectations. FactSet reported profits of $51 million or $1.16 a share, compared to $48.5 million or $1.08 a share. Revenues of the company increased 5.6% to $219.3 million. The company has guided profits for the next quarter in the range of $1.21 and $1.24 a share based on revenues coming in within the range of $222 million and $225 million.
Utilities stocks gained the most during yesterday’s trading session. The Utilities SPDR (XLU) gained 0.6%. Stocks such as Duke Energy Corp (NYSE:DUK), The Southern Company (NYSE:SO), NRG Energy Inc (NYSE:NRG), Sempra Energy (NYSE:SRE) and PG&E Corporation (NYSE:PCG) gained 0.2%, 0.5%, 1.3%, 1.0% and 0.2%, respectively.
Materials stocks were the only losers among the top ten S&P 500 industry groups. The Materials Select Sector (XLB) declined 0.3%. Stocks such as Monsanto Company (NYSE:MON), Air Products & Chemicals, Inc. (NYSE:APD), Ecolab Inc. (NYSE:ECL), Sherwin-Williams Company (NYSE:SHW) and Mosaic Co (NYSE:MOS) declined 1.2%, 1.3%, 0.6%, 1.0% and 1.2%, respectively.