Benchmarks moved slightly higher on Monday in a lackluster trading session as investors were hesitant to take any big positions amid uncertainty over the stimulus program. Market watchers now believe the Federal Reserve will lower its quantum of bond purchases only when the U.S. economy shows clear signs of improvement. Among the S&P 500 industry groups, the energy sector gained the most followed while all other sectors finished in the green.
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The Dow Jones Industrial Average (DJI) gained 0.2% to close the day at 15,639.12. The S&P 500 added 0.4% to finish Monday’s trading session at 1,767.93. The tech-laden Nasdaq Composite Index increased 0.4% to end at 3,936.59. The fear-gauge CBOE Volatility Index (VIX) declined 2.6% to settle at 12.93. Total volume on the NYSE was 3.2 billion shares. Advancing stocks outnumbered the decliners. For 65% shares that advanced, 32% declined.
U.S. stocks ended higher on Monday with trading volumes remaining below average. The Dow and S&P 500 indices posted four straight weeks of gains with the S&P 500 ending just below its all-time high. The day’s dull market activity was partially due to the Dow and S&P 500 indexes’ four continuous week of gains. Also, investors are waiting for the non- farm payrolls report, due on Friday, which will provide indications about what direction the Fed will take about the proposed tapering of its stimulus program. These factors led to a lull in the market for the entire trading day.
On Monday, members of the Central bank said the Federal Reserve should reduce its asset purchases only when it finds clear indications that the economy is improving. Even then, tapering will happen only gradually. This indicated that the central bank will be supporting the economy and financial markets for quite some time now. The opinions provided by the members drew attention towards Fed Chairman Ben Bernanke’s repeated promises to reduce bond purchases only when there are sufficient indications of improvements in the economic situation.
However, the three Fed officials did not comment on exactly when they believe the stimulus program should be withdrawn. The Fed’s third round of quantitative easing has entered its fourteenth month now.
Speaking at the Asia Economic Policy Conference held in San Francisco, Governor of the Federal Reserve Jerome H. Powell said: "What it's reasonable to expect us to do is to be transparent and to move gradually when it is time to withdraw accommodation, or even to begin reducing the pace at which we add accommodation and go slowly in doing that,", Powell called the such measures “necessarily uncertain” since they are linked to the pace of the economic recovery.
Meanwhile, according to the U.S. Department of Commerce, new orders in September for manufactured goods increased 1.7% to $490.8 billion, in line with the consensus estimate. Shipments increased 0.1% to $488.9 billion while unfilled orders and inventories edged up 0.9% and 0.4%. New orders for manufactured durable goods increased 3.8% to $234.3 billion. However, new orders for nondurable goods declined 0.2%.
Earnings numbers for Kellogg Company (NYSE:K) came in above consensus estimates. The company reported earnings per share of 95 cents and revenues of $3.72 billion, beating our consensus estimate of $3.71 billion. Net income was recorded at $326 million. Share prices increased to $62.72 and had risen almost 0.69% by the end of the session. This increase took place after the cereal making company reported a 3% rise in quarterly profits. Kellogg also said it would reduce 7% of its total workforce by the year 2017.
The energy sector was the biggest gainer among the S&P 500 industry groups on Monday. The energy SPDR (XLE) gained 1.24%. Stocks such as Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), Schlumberger Limited. (NYSE:SLB), Occidental Petroleum Corporation (NYSE:OXY), and Pioneer Natural Resources (NYSE:PXD) increased, 2.5%, 0.1%, 0.6%, 2.2%, and3.9% respectively.