Stocks declined for the third consecutive day after strong retail sales data caused profit booking and heightened concerns regarding a near term tapering of the Fed’s stimulus program. The S&P 500 closed at a one month low and the Dow dropped by more than hundred points for the second consecutive day. The energy sector was one of the biggest gainers among the S&P 500 industry groups while consumer staples lost the most.
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The Dow Jones Industrial Average (DJI) slipped nearly 0.7% to close the day at 15739.43. The S&P 500 declined 0.4% to finish yesterday’s trading session at 1775.50. The tech-laden Nasdaq Composite Index fell 0.1% to end at 3998.40. The fear-gauge CBOE Volatility Index (VIX) jumped 0.8% to settle at 15.54. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.7 billion shares. Declining stocks outnumbered the advancers. For 57% shares that declined, only 40% advanced.
According to the U.S. Department of Commerce, retail sales for the month of November rose 0.7%. This was also above the consensus estimate of 0.6%. Retail and food sales for November amounted to $432.3 billion. Retail trade sales increased by 0.6% from October levels and by 4.6% compared to last year. Non store retailers gained 9.4% compared to a year ago.
Market watchers had previously anticipated that the Federal Reserve would reduce its $85 billion bond purchase by March. But upbeat November nonfarm payrolls data, followed by Tuesday’s bipartisan budget deal in Washington and better than expected retail sales numbers led to a change in investor expectations. The Federal Open Market Committee (FOMC) meeting is scheduled on 17th and 18th, and will be the Fed’s last meeting for the year. The outcome of this meeting is widely expected to determine the future of the stimulus program.
Profit booking also played a major role in the decline of the benchmarks yesterday, as investors sold stocks in order to secure profits from the year’s gains so far. This brought about the decline in the retail stocks for the day.
Retail stocks were sold heavily, pushing down the retail sector and the broader markets. The SPDR S&P Retail (ETF) (NYSEARCA: XRT) lost 0.2%. Stocks such as PriceSmart, Inc. (NASDAQ:PSMT), The Kroger Co. (NYSE:KR), Delhaize Group (NYSE:DEG), Weis Markets, Inc. (NYSE:WMK), and Whole Foods Market, Inc. (NASDAQ:WFM) declined 0.4%, 0.9%, 1.2%, 1.5%, and 0.5%, respectively.
The consumer staples sector was among the biggest losers among the S&P 500 industry groups and the Consumer Staples SPDR (XLP) lost 1.4%. 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) slipped 2.1%, 2.3%, 0.7%, 0.8%, and 0.8%, respectively.
Coming to initial claims numbers, the U.S. Department of Labor noted that initial claims increased 68,000 to 368,000 in the last week of December, from the prior week’s revised figure of 300,000. This was considerably above the consensus estimate of 330,000. The four-week moving average was 328,750, an increase of 6,000 from the preceding week’s revised average of 322,750.
Shares of Lululemon Athletica inc. (NASDAQ:LULU) declined 11.7% to $60.39 per share. The company’s shares dropped after company said customers visiting its stores have declined. Additionally, problems persist with Lululemon’s current supply chain. For the third quarter which ended in November, the company’s net income was $66.11 million, compared to $57.32 million a year ago.
This was also well above the Street’s estimates. However, the company’s fourth quarter earnings forecasts were below market estimates. Net revenues are expected to come in within $535-$540 million. This is because Lululemon expects comparable store sales to remain at current levels.
The energy sector was the biggest gainer among the S&P 500 industry groups on Thursday. The Energy SPDR (XLE) gained 0.4%. Stocks such as Exxon Mobil Corporation (NYSE:XOM), ConocoPhillips (NYSE:COP), Schlumberger Limited. (NYSE:SLB), Pioneer Natural Resources (NYSE:PXD), and EOG Resources Inc. (NYSE:EOG) increased 1.2%, 0.5%, 1.0%1.5%, and 1.3%, respectively.