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Stock Market News for February 5, 2013

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Benchmarks retreated from recent highs following weaker-than-expected factory orders and investor concerns about the Euro-zone debt crisis. The S&P 500, which has rallying in 2013 slipped into the red following the bearish sentiment in the market. All ten of the S&P 500 industry groups ended in the red, among which the biggest loser was the technology sector.

The Dow Jones Industrial Average (DJI) decreased 0.9% to close the day at 13,880.08. The S&P 500 declined 1.2% to finish yesterday’s trading session at 1,495.71. The tech-laden Nasdaq Composite Index decreased 1.2% to end at 3,131.17. The fear-gauge CBOE Volatility Index (VIX) surged 13.7% to settle at 14.67. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.3 billion shares, lower than the daily average of 6.45 billion shares in 2012. Declining stocks outnumbered the advancers on the NYSE. For 75% stocks that declined, 22% advanced.

Last week the blue-chip index touched its highest level in more than five years and closed above the 14,000 mark. The index was pushed higher by a series of encouraging economic numbers. Encouraging news was received from non-farm payroll, construction spending and the US manufacturing sector. The blue-chip index closed above the 14,000 mark for the tenth time in its history. However, this rally ended yesterday following discouraging international news and factory orders numbers.

Meanwhile, factory orders numbers, which was released on Monday, was below the Street’s estimates. According to the U.S. Department of Commerce, new orders for manufacturing goods increased 1.8% to $484.8 billion. This was below the consensus estimate of 1.9%. Excluding transportation, growth in new orders was 0.2%. Unfilled shipment orders rose marginally, by 0.8% to $991.7 billion from November numbers. Meanwhile, shipments increased 0.4% to $484.9 billion from 0.3% in November.

Fresh investor concerns arose about a revival of the European debt crisis after the yield on Spanish and Italian bonds increased. Yields on the Spanish and Italian bonds logged their biggest gains since September. Further disappointing news came from Spain where the country’s Prime Minister Mario Dragi has been asked to resign, following his alleged involvement in illicit transactions.   

Questions have been raised on the mortgage bond ratings provided by Standard & Poor following which the shares of its parent company The McGraw-Hill Companies, Inc.(NYSE:MHP) slumped by 13.8%. This is the biggest single-day decline for the company since the market crash of 1987. The U.S. Department of Justice is expected to file a civil lawsuit against the credit rating agency.

Merck & Co., Inc. (NYSE:MRK) shares declined 2.3% following its fourth-quarter earnings.  The company said its earnings fell and also said that 2013 may not be a good year. On the other hand, Humana Inc. (NYSE:HUM) jumped 4.7% after the company’s earnings came above the Street’s estimates. According to fresh data from Thomson Reuters data, S&P 500 earnings may increase by 4.4% in fourth-quarter. This is above its initial estimates of 1.9% but well below the October forecast of 9.9%.

All ten of the S&P 500 industry groups had a bad trading day yesterday. The technology sector was the biggest loser among the S&P 500 industry groups and the Technology SPDR (XLK) lost 1.3%. Stocks such as Apple Inc. (NASDAQ:AAPL), Hewlett-Packard Company (NYSE:HPQ), Dell Inc. (NASDAQ:DELL), Microsoft Corporation (NASDAQ:MSFT) and Avid Technology, Inc. (NASDAQ:AVID) decreased 2.5%, 1.7%, 2.6%, 1.8% and 3.8%, respectively.

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