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Stock Market News for September 18, 2012

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A drop in oil prices and lower factory activity in New York partially weighed down sentiment, dragging benchmarks into the red. In addition, investors opted to pause following the benchmarks’ four-day winning run, during which they touched new multi-year highs. Separately, record-setting pre-order sales of iPhone5 boosted Apple’s shares to a new all time high.

The Dow Jones Industrial Average (DJI) dropped 0.3% to close the day at 13,553.10. The Standard & Poor 500 (S&P 500) finished yesterday’s trading session 0.3% lower at 1,461.19. The tech-laden Nasdaq Composite Index slipped 0.2% to end at 3,178.67. The fear-gauge CBOE Volatility Index (VIX) added a mere 0.6% to settle just 0.08 point higher at 14.59. Consolidated volumes on the New York Stock Exchange, the Nasdaq and the American Stock Exchange were roughly 5.64 billion shares, lower than the year-to-date daily average of 6.54 billion. Declining stocks outpaced the advancers on the NYSE by a 2:1 ratio.

Volumes were lower than average following two back-to-back days of strong volumes. While some observers said the Jewish New Year was the primary reason, low volumes also had a lot to do with the investors opting to pause following the strong uptrend for four consecutive days last week. Benchmarks enjoyed robust gains during these four days and that led to benchmarks achieving new multi-year highs on Friday.

It was the Street’s expectations for a favorable announcement from the Fed and German a court’s key decision allowing the nation to ratify the Euro zone’s rescue fund that kick-started the four-day rally. Over the next days, both these developments made their presence felt and benchmarks soared. Most importantly, The U.S. Federal Reserve announced a third round of quantitative easing (QE3). The announcement about QE3 came after months of anticipation. Moreover, the central bank did not restrict the purchase of mortgage debt within a specific time frame. The Fed announced that it will buy back mortgage-backed securities worth $40 billion every month till labor conditions improve.

However, benchmarks shied away from gains yesterday owing to a couple of dismal factors and investors chose to hold onto their bets. Rumors that crude oil would be released from the US’ Strategic Petroleum Reserves dragged oil prices sharply lower. According to reports, a computer trading glitch also dented crude prices and resulted in a sharp increase in volumes. In only three minutes of trading, Brent crude oil slumped to $111.60 a barrel from $115.20 a barrel. However, it finally settled at $113.79 per barrel. U.S. light, sweet crude also dropped $2.38 to finish at $96.62 per barrel.

Following the slump in crude oil prices, energy shares were badly affected and the Energy Select Sector SPDR (XLE) dropped 0.8%. As for the shares, BP plc (NYSE:BP), Exxon Mobil Corporation (NYSE:XOM), Total SA (NYSE:TOT), Western Refining, Inc. (NYSE:WNR), Valero Energy Corporation (NYSE:VLO), Marathon Oil Corporation (NYSE:MRO), Halliburton Company (NYSE:HAL) and Schlumberger Limited (NYSE:SLB) plunged 1.4%, 0.4%, 1.0%, 2.8%, 5.1%, 0.9%, 0.6% and 0.6%, respectively.

Moreover, factory activity in New York was reported to have dropped for the second consecutive month. According to the September Empire State Manufacturing Survey by the Federal Reserve Bank of New York, the general business conditions index dropped five points to a negative 10.4 and the new orders index slumped nine points to negative 14.0. General business conditions were also sharply lower than consensus estimates for a positive reading of 0.67.

On the other hand, pre-orders for iPhone 5 set a new record by touching 2 million units in 24 hours. Its predecessor, iPhone 4S had attracted 1 million orders in the first 24 hours of its release. The record-setting orders numbers helped the shares of the tech-bellwether Apple Inc. (NASDAQ:AAPL) to touch a new all-time high. The company’s shares closed 1.2% higher at $699.78 a share.

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