Benchmarks ended in the negative territory on Thursday as encouraging economic reports once again intensified apprehensions that Federal Reserve’s tapering may happen sooner than expected. The economy was reported to have expanded at a faster rate and the initial claims number dropped. Now, Friday’s nonfarm payroll report will be keenly watched for further hints on Fed’s taper decision. The Dow and the S&P 500 extended losses to the fifth consecutive day and the benchmarks are staring at a possible weekly decline after eight weeks of gains. Consumer discretionary sector was the biggest gainer among the S&P 500 industry groups, while financials lost the most.
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The Dow Jones Industrial Average (DJI) lost about 0.4% to close the day at 15821.51. The S&P 500 declined 0.4% to finish yesterday’s trading session at 1785.03. The tech-laden Nasdaq Composite Index decreased 0.1% to end at 4033.16. The fear-gauge CBOE Volatility Index (VIX) rose 2.6% to settle at 15.08. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.7 billion shares. Declining stocks outnumbered the advancers. For 64% shares that declined, only 33% advanced.
The second estimate released by the Bureau of Economic Analysis noted that the nation’s real gross domestic product (GDP) increased 3.6% annually in the third quarter. This was higher than the consensus estimate of 3% and up from 2.8% recorded in the initial estimate. Private inventory investment, personal consumption expenditures (PCE), exports, non-residential fixed investment, and state and local government spending aided the GDP growth.
Coming to the initial claims number, the U.S. Department of Labor noted that initial claims dropped 23,000 to 298,000 in the last week of November, from the prior week’s revised figure of 321,000. This was considerably below the consensus estimate of 329,000. The four-week moving average was 2,796,500, a decline of 32,500 from the preceding week’s revised average of 2,829,000.
This follows Wednesday’s National Employment Report released by Automatic Data Processing, Inc. (NASDAQ:ADP) which stated that the U.S. nonfarm private sector employment added 215,000 jobs in November. This was higher than the expected increase of 173,000 jobs. The numbers were on the brighter side with private sector job additions increasing beyond 200K for the first time in about 12 months.
Separately, the U.S. Department of Commerce reported that new orders in October for manufactured goods decreased 0.9% to $486.9 billion. It was also wider than the consensus estimate of a 0.8% decline. Shipments increased 0.1% to $489.3 billion. Inventories increased 0.1% to $633.5 billion.
The Federal Reserve had previously said on many instances that the tapering of stimulus program will be initiated only after there are clear signs of growth in the economy. The Fed minutes released about two weeks ago noted: “Many members stressed the data-dependent nature of the current asset-purchase program…Some pointed out that, if economic conditions warranted, the Committee could decide to slow the pace of purchases at one of its next few meetings".
The consumer discretionary sector was the biggest gainer among the S&P 500 industry groups on Thursday. The Consumer Discretionary SPDR (XLY) gained 0.1%. Stocks such as Comcast Corporation (NASDAQ:CMCSA), The Walt Disney Company (NYSE:DIS), The Home Depot, Inc. (NYSE:HD), Ford Motor Company (NYSE:F), and Time Warner Inc. (NYSE:TWX) increased 0.4%, 0.4%, 0.2%, 0.7%, and 0.2%, respectively.
The financials sector was the biggest loser among the S&P 500 industry groups on Thursday. The Financials SPDR (XLF) lost 0.9%. Stocks such as JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Co (NYSE:WFC), Berkshire Hathaway Inc. (NYSE:BRK.B), Bank of America Corp (NYSE:BAC), and Citigroup Inc. (NYSE:C) decreased 2.4%, 1.1%, 0.3%, 1.3%, and 1.9%, respectively.