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Stock Market News for January 31, 2013

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Benchmarks ended in the red following reports which showed that the U.S. economy surprisingly shrunk in the fourth quarter. Positive sentiments of investors were dampened after the Federal Reserve stated that the economic growth was probably short-lived and has grinded to a halt. The only gainer among the S&P 500 industry groups was the utilities sector while the industrial sector emerged as the biggest loser.

The Dow Jones Industrial Average (DJI) lost 0.3% to close the day at 13,910.42. The S&P 500 decreased 0.4% to finish yesterday’s trading session at 1,501.96. The tech-laden Nasdaq Composite Index slipped 0.4% to end at 3,142.31. The fear-gauge CBOE Volatility Index (VIX) jumped 7.6% to settle at 14.32. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.2 billion shares, lower than the daily average of 6.45 billion shares in 2012. Declining stocks outnumbered advancers on the NYSE; as for 62% stocks that fell, 35% moved higher.

On Wednesday, the Street began its steady trading session on a low after the U.S. Department of Commerce reported that the U.S. economy contracted sharply in the fourth quarter. According to U.S. Department of Commerce, the U.S. economy declined 0.1% annually in the fourth quarter. This was contrary to the consensus estimate of a rise of 1.2%. In the third quarter real GDP rose 3.1%. The declining GDP in the fourth quarter is attributable to the adverse effects of federal government spending, private inventory management and exports.

The Federal Reserve said that in order to boost the economy the central bank will keep on purchasing mortgage-backed securities worth $40 billion a month along with long-term Treasury securities worth $45 billion per month, totaling $85 billion a month. This policy is intended to reduce unemployment and boost the economy. The securities and long-term treasury purchased by the Central Bank will continue to maintain short-term interest rate at near zero levels till the U.S. unemployment rate drops below 6.5%.

Shares of online retail giant, Inc. (NASDAQ:AMZN) surged 4.8% after it registered strong earnings for the fourth quarter. Revenue of the company rose 22% and the profit margin improved too. Shares of the Boeing Company (NYSE:BA) increased almost 1.3% after the company reported decent profits. The profits of the company are attributable to increase in earnings from commercial jets, which were diluted by lower profit from the defense segment.

On an encouraging note, Automatic Data Processing’s (NASDAQ:ADP) National Employment report revealed that the U.S. private sector added 192,000 jobs in January. The report also noted that small businesses added 115,000 jobs whereas the medium added 79,000 more jobs. But jobs in the large businesses declined by 2,000. Service producing sector accounted for 177,000 more jobs whereas goods producing sector added 15,000 jobs.

The utilities sector was the only gainer among the S&P 500 industry groups and the Utilities SPDR (XLU) edged up 0.1%. Stocks such as NRG Energy Inc (NYSE:NRG), Dominion Resources, Inc. (NYSE:D), Duke Energy Corp (NYSE:DUK), Integrys Energy Group, Inc. (NYSE:TEG) and Wisconsin Energy Corporation (NYSE:WEC) added 0.3%, 0.3%, 0.7%, 0.2% and 0.7%, respectively.

The industrials sector had a bad run and emerged as the biggest loser among the S&P 500 industry groups. The Industrial Select Sector SPDR (XLI) lost 0.9%. Stocks such as United Parcel Service, Inc. (NYSE:UPS), 3M Co (NYSE:MMM), Deere & Company (NYSE:DE) and United Technologies Corporation (NYSE:UTX) decreased 1.2%, 1.0%, 0.1% and 0.7%, respectively.

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