Benchmarks ended the five day losing streak as the number of Americans filing for unemployment benefits came down to a six year low. Meanwhile, Gross Domestic Product (GDP) estimate grew 2.5%, however, was marginally below expectations. Investors are still concerned over a possible government shutdown as the deadline approaches. Of the top ten S&P 500 industry groups consumer discretionary stocks gained the most. However, utilities were the only loser.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street
The Dow Jones Industrial Average (DJI) gained 0.4% to close the day at 15,328.30. The S&P 500 increased 0.4% to finish yesterday’s trading session at 1,692.77. The tech-laden Nasdaq Composite Index rose 0.7% to end at 3,787.43. The fear-gauge CBOE Volatility Index (VIX) increased 0.4% to settle at 14.06. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.4 billion shares, below 2013’s average of 6.24 billion shares. Advancing stocks outnumbered the decliners. For 36% shares that declined, 60% advanced.
Benchmarks garnered gains as investor sentiment turned positive on the back of better than expected initial claims data. However, despite these encouraging numbers investor concerns loomed over a possible Government shutdown. The US Government might meet its fate if appropriate bills are not cleared in the parliament before September 30.
Congress was well informed by the Obama administration that the Treasury does not have enough cash to pay Government expenses, thus might face the historical default. On the other hand, Republicans have refused to bend down in front of President Obama’s proposal of clearing bills in the parliament. Clearing of bills would keep the Government running after September 30 and will also avert the first of a kind default.
According to the US Department of Labor, number of Americans opting for unemployment benefits, declined by 5,000 to 305,000. This is well below previous week’s figure of 310,000 and consensus estimates of 331,000. The initial claims data touched it lowest point in nearly six years. On a 4-week moving average basis, the figure declined by 7,000 to 308,000. This is the lowest figure recorded since June 2007.
Meanwhile, according to the US Department of Commerce, the US economy grew by 2.5% in the second quarter. This is marginally below the consensus estimates of 2.6%. The US economy increased on the back of better than expected exports and nonresidential fixed investments. However, the increase was offset by imports and below than expected contribution from federal government spending.
Another report disclosed by the Department of Commerce revealed that the price index for consumer purchase declined 0.1%. This is not a good sign for the economy as this implicates that there is no space for the businesses to raise prices. Excluding food and energy costs, the price index just increased 0.6%. This has been a first negative reading since the recession in the 2007-2009 period.
Consumer discretionary stocks gained the most among top ten S&P 500 industry groups. The Consumer Discretionary SPDR (XLY) gained 0.9%. Stocks such as Amazon.com, Inc. (NASDAQ:AMZN), Comcast Corporation (NASDAQ:CMCSA), The Home Depot, Inc. (NYSE:HD), The Walt Disney Company (NYSE:DIS) and McDonald's Corporation (NYSE:MCD) gained 1.8%, 2.0%, 0.7%, 1.2% and 0.6%, respectively.
Utilities stocks were the only losers. The Utilities SPDR (XLU) lost 0.1%. Public Service Enterprise Group Inc. (NYSE:PEG), Exelon Corporation (NYSE:EXC), PG&E Corporation (NYSE:PCG), Consolidated Edison, Inc. (NYSE:ED) and Edison International (NYSE:EIX) lost 0.7%, 0.7%, 0.9%, 0.3% and 0.8%, respectively.