Better-than-expected results from major companies improved investor sentiment, helping the benchmarks finish in the green. Last week, the Dow Jones and the S&P 500 witnessed their worst drop since November due to discouraging international and national reports. Among the top ten S&P 500 industry groups, consumer staples stocks were the biggest gainers, while energy stocks were the only losers.
The Dow Jones Industrial Average (DJI) increased 0.1% to close the day at 14,547.51. The S&P 500 gained 0.9% to finish Friday’s trading session at 1,555.25. The tech-laden Nasdaq Composite Index rose 1.3% to end at 3,206.06. The fear-gauge CBOE Volatility Index (VIX) lost 14.8% to settle at 14.97. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.4 billion shares, below 2012’s average of 6.48 billion shares. Advancing stocks outnumbered the decliners. For the 71% that advanced, 26% declined.
The major indices witnessed their worst week since November after dismal growth reports from China triggered a massive sell-off in commodities, ultimately leading to a sell-off in equity. The world’s second largest economy reported a growth rate of 7.7% in comparison to the expected growth rate of 7.9%. The fear from Boston bombings also spilled over to the stock markets. In addition to these discouraging developments, the manufacturing activity and an increase in the initial claims indicated disturbance in the economic weather.
Last week, the Dow, the S&P 500 and the Nasdaq lost 2.1%, 2.1% and 2.7%, respectively. The VIX, known as the fear index, increased 24% last week to settle at 14.97. This increase was the highest weekly increase since December. The VIX, which usually moves opposite to the S&P 500, reached its lowest level in almost six years last month.
Meanwhile, the President of the Federal Reserve of St. Louis, James Bullard, expressed concerns about the inflation rate. Prices of consumer goods have only increased 1.3% year over year. Usually the Fed tries to maintain the inflation rate at 2%, as it reflects economic health, rise in wages and a growing employment scenario.
"I'm getting concerned about that, and I think that gives the FOMC some room to maneuver on its monetary policy." he said.
On the earnings front, shares of the world’s largest restaurant chain, McDonald's Corporation (NYSE:MCD) decreased 1.9% after it reported weaker-than-expected results. The company reported lower-than-expected first-quarter revenues following a drop in U.S. same-store sales and weak demand in March.
Meanwhile, shares of the eight largest U.S. bank by assets, Capital One Financial Corp. (NYSE:COF) increased 6.4% after it reported better-than-expected results. The company primarily booked profits due to an improvement in lending margins. According to the Bloomberg data, out of the 103 companies that have reported earnings, 72% have beaten the Street’s estimates out which, 51% has trailed revenues.
Of the top ten S&P 500 industry groups, consumer staples stocks emerged as the biggest gainer. The Consumer Staples Select Sect. SPDR (XLP) gained 1.6%. Stocks such as Procter & Gamble Company (NYSE:PG), Coca-Cola Company (NYSE:KO), Philip Morris International Inc. (NYSE:PM), Wal-Mart Stores, Inc. (NYSE:WMT) and CVS Caremark Corporation (NYSE:CVS) gained 2.0%, 1.3%, 0.3%, 1.5% and 2.4%, respectively.
Of the top ten S&P 500 industry groups, energy stocks were the only losers. The Energy Select Sector SPDR (XLE) lost almost 0.2%. Stocks such as Occidental Petroleum Corporation (NYSE:OXY), Marathon Oil Corporation (NYSE:MRO), EOG Resources Inc. (NYSE:EOG), Hess Corp. (NYSE:HES) and Southwestern Energy Company (NYSE:SWN) lost 0.4%, 0.9%, 1.6%, 0.4% and 1.4%, respectively
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