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Stock Market News for September 11, 2012

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Weak domestic and Chinese economic readings dragged the benchmarks down yesterday. Moreover, heavyweights Apple and Intel both slumped to guide the broader markets into the red. Yesterday’s losses came after the recent robust rally that witnessed benchmarks touching multi-year highs. Investors also preferred to wait for the outcome of the central bank’s policy meet later this week.

The Dow Jones Industrial Average (DJI) ended 0.4% lower at 13,254.29. The Standard & Poor 500 (S&P 500) edged down 0.6% and finished yesterday’s trading session at 1,429.08. The tech-laden Nasdaq Composite Index inched down by a percentage point to close at 3,104.02. The fear-gauge CBOE Volatility Index (VIX) soared 13.2% to settle at 16.28. Consolidated volumes on the New York Stock Exchange, Nasdaq, and the American Stock Exchange were roughly 5.56 billion shares, lower than prior year’s average of 7.84 billion shares. Declining stocks outpaced the advancing ones on the NYSE by a ratio of 3:2.

On a day devoid of any other major headlines, investors focused on a couple of economic readings. Unfortunately, data from the domestic economy as well as China was far from optimistic. China suffered its third straight month of decline in imports. The figure dropped 2.6% year on year in August and was also below estimates of 3.5% gain. Even exports expanded by 2.7% compared to estimates of a 3% hike.

While these two figures showed signs of weakness, concerns were further intensified after China’s industrial output decelerated to the slowest level in three years. The measure of industrial production showed a growth of 8.9% in August, down from growth in factory production of 9.2% in the prior month. These concerns were mirrored in the comments of Chinese President Hu Jintao, who said “Pressure for economic growth to slow is obvious”.

Coming to the domestic front, The Federal Reserve reported that the US had reduced credit card spending in July. According to data from the Board of Governors of the Federal Reserve System, “In July, total consumer credit decreased at a seasonally adjusted annual rate of 1-1/2 percent. Revolving credit decreased at an annual rate 6-3/4 percent, and nonrevolving credit increased at an annual rate of 1 percent”. This was the second consecutive month of decline and came in contrary to consensus estimates of a gain of 8.5%.

These negative economic readings taxed heavily on the markets as they retreated into the negative zone after a recent healthy run. Benchmarks enjoyed an upward rally late last week and on Thursday the robust gains had helped them achieve multi-year highs. After the robust gains on Thursday, benchmarks had a relatively lighter session on Friday, when the nonfarm payroll report was tepid but eventually helped to spark hopes about the additional economic measures by the US Federal Reserve.

Labor data is a key indicator of economic health. Strategists opined that weak numbers would possibly make the US Federal Reserve prioritize the need for additional economic measures. With the policy meeting of the central bank scheduled later this week, investors opted to wait and watch before betting big bucks.

Separately, tech heavyweights Apple Inc. (NASDAQ:AAPL) and Intel Corporation (NASDAQ:INTC) suffered declines of 2.6% and 3.8%, respectively, which also led to a fall in technology shares. The Technology Select Sector SPDR (XLK) was down 1.1%. In fact, declines in the technology sector also affected the broader markets as Apple is the largest component of the Nasdaq. Among other tech shares, Microsoft Corporation (NASDAQ:MSFT), Oracle Corporation (NASDAQ:ORCL), Yahoo! Inc. (NASDAQ:YHOO), Google Inc. (NASDAQ:GOOG) and Inc. (NASDAQ:AMZN) dropped 0.7%, 0.9%, 0.7%, 0.8% and 0.8%, respectively.

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