Benchmarks ended in the red once again yesterday, hurt by mixed economic numbers. The third-straight decline for S&P 500 meant this was the index’s worst start to any year in about 10 years. Service sector data indicated a slowdown, while new orders for factory goods improved. Among the sectors, technology and consumer discretionary were among the biggest laggards, while financials had a good run.
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The Dow Jones Industrial Average (DJI) dropped 0.3% to close at 16,425.10. The Standard & Poor 500 (S&P 500) too dropped 0.3% and ended yesterday’s trading session at 1,826.77. The tech-laden Nasdaq Composite Index incurred maximum losses as it ended 0.4% lower at 4,113.68. However, the fear-gauge CBOE Volatility Index (VIX) declined 1.5% to 13.55. Volumes were at 5.44 billion shares on the US exchanges. Advancers were outpaced by decliners on the New York Stock Exchange; as for 45% stocks that gained, 53% ended in the red.
The day’s action was dominated primarily by mixed economic data. The slowdown in the US services sector and a rebound in new orders for factory goods dampened investor sentiment. Eventually, the S&P 500 suffered its third-straight loss and had the worst start to a year since 2005. In fact in that year, the S&P 500 had ended with a meager 3% annual gain. The S&P 500 has so far dropped 1.2% this year, and the Dow and Nasdaq are down 0.9% and 1.5%, respectively. However, both the blue-chip index and S&P 500 are still above their 200-day moving averages.
Coming back to economic data, the Institute of Supply Management reported that its non-manufacturing index dropped 0.9 percentage point from November to 53% in December. The reading compared unfavorably to consensus estimates of a climb to 55.2. Moreover, the Non-Manufacturing Business Activity Index dropped 0.3 percentage point from November to 55.2% in December and the New Orders Index showed a contraction as it dropped 7 percentage points to 49.4. This was the first contraction in New Orders Index after 52 months of growth.
However, the U.S. Census Bureau reported that the new orders for manufactured goods had gained 1.8% in November to $497.9 billion. This jump outpaced consensus estimates of a gain of 1.6% and also helped the data to climb to its highest level since it was published for the first time on a NAICS basis in 1992. Also, the new orders rebounded from the 0.5% drop in October. This comes after the ISM had reported last week that the New Orders Index had improved to its best reading since Apr 2010 when it gained 0.6 percentage point to 64.2 in December.
Looking at the sector-wise performances, the Technology Select Sector SPDR (XLK) dropped 0.2%. Tech stocks such as International Business Machines Corp. (NYSE:IBM), Oracle Corporation (NYSE:ORCL), Microsoft Corporation (NASDAQ:MSFT) and Hewlett-Packard Company (NYSE:HPQ) dropped 0.3%, 0.4%, 2.1% and 0.2%, respectively. Consumer Discret Select Sector SPDR (XLY) was also a major loser as it ended 0.6% lower. Among the stocks, The Home Depot, Inc. (NYSE:HD), McDonald’s Corporation (NYSE:MCD), Starbucks Corporation (NASDAQ:SBUX) and Time Warner Inc (NYSE:TWX) dropped 1.0%, 0.7%, 1.0% and 0.7%, respectively.
Financials however had a positive finish and the Financial Select Sector SPDR (XLF) rose 0.1%. Among the financial stocks Goldman Sachs Group Inc (NYSE:GS), Morgan Stanley (NYSE:MS), Citigroup Inc (NYSE:C), U.S. Bancorp (NYSE:USB) and JPMorgan Chase & Co. (NYSE:JPM) gained 0.7%, 0.4%, 0.8%, 1.3% and 0.6%, respectively.