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Stock Market News for January 24, 2014

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Dismal manufacturing data from China dragged US benchmarks down to heavy losses yesterday. The Dow dipped for the third-straight day yesterday, which was also its worst session since August. None of the positive domestic corporate results could come to the markets’ rescue. Separately, initial claims rose and existing home sales came in below estimates. Financials were the biggest loser yesterday.

For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article
The Dow Jones Industrial Average (DJI) plunged almost 176 points, or 1.1%, to end Thursday’s session at 16,197.35. The Standard & Poor 500 (S&P 500) dropped 0.9% to finish at 1,828.46. The tech-laden Nasdaq Composite Index closed at 4,218.87, down 0.6%. The fear-gauge CBOE Volatility Index (VIX) jumped 7.2% to settle at 13.77. Total volume on the New York Stock Exchange was 4.01 billion. The declining stocks outpaced the advancers in the NYSE, as for 65% stocks that declined, 32% stocks ended in the green.
Of late, market sentiment has been dominated by earning results. However, it was weak manufacturing data from China that dealt a heavy blow to domestic benchmarks yesterday. Hardly any corporate results could prevent the indices’ finish in the red.
Coming to Chinese data, the HSBC preliminary survey showed a contraction in China’s manufacturing sector. The “flash” HSBC/Markit China manufacturing Purchasing Managers’ Index dropped to 49.6 in January from the 50.5 registered in December. The preliminary PMI reading dropped to a six-month low and was short of estimates of a reading of 50.3.
Commenting on the data, Hongbin Qu, HSBC chief China economist, said: “marginal contraction ... was mainly dragged by cooling domestic demand conditions. This implies softening growth momentum for manufacturing sectors, which has already weighed on employment growth”.
The data set the bearish tone of the domestic markets and investors preferred to bet on U.S. government debt securities instead of equities. Domestic economic data was also a mixed bag. The Markit Flash U.S. Manufacturing Purchasing Managers’ Index was reported to have dropped in January to 53.7 from 55 in December. Separately, the U.S. Department of Labor reported that initial claims in the week ending Jan 18 was at 326,000, up 1,000 from prior week’s 325,000.
On the other hand, home sales hit a seven-year high. The National Association of Realtors reported that 2013 housing sales hit their highest level since 2006. 2013 sales jumped 9.1% year on year to 5.09 million. As for the total existing-home sales in December, the number increased 1% from November to 4.87 million.
However, the housing report failed to spark off any optimism. Similarly, positive earnings results from the likes of Johnson Controls Inc. (NYSE:JCI) (4.4%), KeyCorp. (NYSE:KEY) (3.3%) and Jacobs Engineering Group Inc. (NYSE:JEC) (3.3%) failed to lift the mood. In fact, their in-line results or earnings beats were discounted to the extent that these stocks themselves were down 4.4%, 3.3% and 3.3%, respectively.

The financial sector suffered the heaviest losses yesterday and the Financial Select Sector SPDR (XLF) was down 1.6%. Key financial stocks like Bank of America Corporation (NYSE:BAC), Citigroup Inc. (NYSE:C), The Goldman Sachs Group, Inc. (NYSE:GS), Wells Fargo & Company (NYSE:WFC), Morgan Stanley (NYSE:MS) and American Express Company (NYSE:AXP) dropped 1.7%, 2.3%, 1.7%, 0.7%, 2.5% and 2.2%, respectively

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