Benchmarks managed to eke out gains on the back of a target price upgrade for a major technology company. However, there was a lull in trading as investors continued to await the Federal Reserve’s decision on tapering of the bond purchase program. A bunch of mixed economic reports were released on Friday. Of the top ten S&P 500 industry groups, consumer staples stocks gained the most. Energy stocks were the only losers.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.
The Dow Jones Industrial Average (:DJI) gained 0.5% to close the day at 15,376.06 The S&P 500 increased 0.3% to finish Friday’s trading session at 1,687.99. The tech-laden Nasdaq Composite Index rose 0.2% to end at 3722.18. The fear-gauge CBOE Volatility Index (:VIX) declined 0.9% to settle at 14.16. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5 billion shares, below 2013’s average of 6.24 billion shares. Advancing stocks outnumbered the decliners. For 36% shares that declined, 61% advanced.
Last week, the Dow posted its best week since January. The Dow, S&P 500 and Nasdaq has increased 3%, 2% and 1.7%, respectively for the week. Benchmarks were battered last month due to fears that the US would launch a military strike on Syria. However, these fears evaporated after Russia proposed a deal which entailed that Syria would have to surrender its chemical weapons to avoid a military intervention. Last week, investor confidence was also boosted after China released a couple of positive economic indicators.
Investors have turned their attention towards the Federal Reserve’s two day policy meeting. Investors expect that in light of below than expected performance of economic indicators in the third quarter, the $85 billion bond purchase program might be reduced by only $10 billion.
A couple of domestic reports were released on Friday. According to the US Department of Commerce, retail sales for the month of August increased marginally, by 0.2% compared to the consensus estimate of 0.4%. Slowing of retail sales is a sign of sluggish economic growth. Strong demand was seen in automobiles, electronics, appliances and furniture. However, slow demand was witnessed in sporting goods, building materials and clothing. In spite of the tepid growth in retail sales, consumer spending was up for the fifth month in a row. Increase in retail sales were led by a 0.9% increase in auto dealerships. However, clothing store receipts decreased 0.8% while building materials and garden equipment fell 0.9%.
According to the US Department of Labor, the US Producer Price Index for the month of August increased 0.3% compared to the consensus estimate. of 0.2%. Increase in the producer price index is mainly attributable to an increase in gasoline costs. Gasoline costs rose by 2.6%. The increase in the PPI index is also attributable to an increase in food prices. On the other hand, passenger car prices and light truck prices declined 0.5% and 0.3%, respectively.
The Thomson Reuters/University of Michigan's Consumer Sentiment Index for September came in 76.8 compared to August’s reading of 82.1. The decline in consumer sentiment is attributable to the wariness of Americans who expect that an increase in interest rates will dampen the housing market.
Consumer staples stocks gained the most among the top ten S&P 500 industry groups. Consumer Staples Select Sect. SPDR (XLP) gained 0.8%. Stocks such as the Procter & Gamble Company (NYSE:PG), the Coca-Cola Company (NYSE:KO), Philip Morris International Inc. (NYSE:PM), Wal-Mart Stores, Inc. (NYSE:WMT) and CVS Caremark Corporation (NYSE:CVS) gained 1.0%, 0.7%, 1.7%, 0.6% and 0.7%, respectively.
Energy stocks were the only losers among the top ten S&P 500 industry groups. The Energy Select Sector SPDR (XLE) lost 0.1%. Stocks such as Occidental Petroleum Corporation (NYSE:OXY), Devon Energy Corp (NYSE:DVN), EOG Resources Inc (NYSE:EOG), Marathon Oil Corporation (NYSE:MRO) and Apache Corporation (NYSE:APA) lost 1.7%, 0.9%, 0.9%, 1.1% and 0.5%, respectively.
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