Benchmarks finished mostly lower on Monday following mixed economic numbers. A gauge of pending home sales numbers hit its highest level in eight months in May. However, data from the Institute for Supply Management showed Chicago PMI numbers dropped more than expected. For the month, the S&P 500 settled in the green and recorded its best quarterly gains since 1998. The Nasdaq also registered monthly gains and posted its longest streak of quarterly gains since 2000. The blue-chip index too ended in the green for the month and the quarter. All benchmarks also notched up gains during the first half of 2014.
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The Dow Jones Industrial Average (DJI) declined almost 0.2% to close Monday’s trading session at 16,826.60. The Standard & Poor 500 (S&P 500) dropped a meager 0.04% to finish at 1,960.23. The tech-laden Nasdaq Composite Index closed at 4,408.18; gaining 0.2%. The fear-gauge CBOE Volatility Index (VIX) went up almost 2.8% to settle at 11.57. Total volume for the day was roughly 5.7 billion shares, lower than this month’s average of 5.8 billion. Advancers outpaced declining stocks on the NYSE. For 58% stocks that advanced, 38% declined.
Markets received mixed economic data on Monday. The National Association of Realtors reported that Pending Home Sales Index, a forward looking indicator based on contract signings, went up 6.1% to 103.9 in May. This was way ahead of the consensus estimate of an increase by 1.0%. Further, May’s 6.1% increase turned out to be the largest month-over-month gain since April 2010. It also touched the highest level in eight months.
In another report, the Chicago PMI numbers were disappointing as the Survey by Institute for Supply Management-Chicago noted that Chicago Business Barometer declined to 62.6 in June from May’s reading of 65.5. The consensus estimated the Chicago PMI numbers to decline to 62.9.
Investors in this holiday-shortened week remained focused on the Institute for Supply Management’s manufacturing report for June. The ISM Manufacturing Index is expected to edge up to 55.7% in June from 55.4% in May. The report is scheduled to be released on Tuesday.
Investors also kept an eye on U.S. jobs data for June, which is expected to be released on Thursday. Analysts are expecting an addition of 215,000 nonfarm payroll jobs. However, they believe the unemployment rate will remain unchanged at 6.3%.
Chipmaker Micron Technology Inc. (NASDAQ:MU) helped Nasdaq move up. Shares of Micron surged 4.6% after the company was added to the Focus List at Credit Suisse Group AG (NYSE:CS). Further, tech-bellwether Apple Inc. (NASDAQ:AAPL) also ensured a positive finish for Nasdaq. Shares of Apple went up 1.0%.
Five out of 10 sectors of the S&P 500 ended in the green. The Utilities Select Sector SPDR (XLU) gained 0.8%, the highest among the S&P 500 sectors. Key stocks from the sector such as Duke Energy Corporation (NYSE:DUK), NextEra Energy, Inc. (NYSE:NEE), Dominion Resources, Inc. (NYSE:D), Southern Company (NYSE:SO), Exelon Corporation (NYSE:EXC) increased 0.7%, 0.9%, 0.9%, 0.7% and 0.5%, respectively.
On the other hand, the Industrial sector declined the most among the S&P industry groups. The Industrial Select Sector SPDR (XLI) declined 0.4%. Key stocks from the industrial sector such as General Electric Company (NYSE:GE), United Technologies Corp. (NYSE:UTX), The Boeing Company (NYSE:BA), 3M Company (NYSE:MMM) and Honeywell International Inc. (NYSE:HON) dropped 0.6%, 0.9%, 1.0%, 0.3% and 0.3%, respectively.
For the month, benchmarks ended in the green. The S&P 500 registered its fifth successive month of gains. The index gained 1.9% in June. The Dow and the Nasdaq also gained 0.7% and 3.9%, respectively over the month.
Gains in technology, media, financial and small-cap stocks during the month helped benchmarks end in the green. Further, optimism over the Federal Reserve’s commitment to continue with the low interest rate environment for “considerable time” helped benchmarks move up. At the end of its two-day meeting, the Federal Open Market Committee (FOMC) released a statement that said benchmark interest rates were left unchanged at 0.00-0.25%. The central bank also trimmed its bond buyback plan for the fifth consecutive month, by $10 billion. The asset repurchase plan now stands at $35 billion a month.
In addition to this, President Barack Obama’s decision to refrain from sending in ground troops to Iraq and European Central Bank’s several stimulus measures in an effort to boost eurozone’s recovery had a positive impact on the benchmarks.
Meanwhile, hedge fund manager David Tepper’s comment that ECB’s moves partly “alleviated” his concerns about the market and news of Carl Icahn taking a 9.4% stake in Family Dollar Stores Inc. (NYSE:FDO) were other catalysts.
New deals between Medtronic, Inc.(NYSE:MDT) and Covidien plc (NYSE:COV), Williams Companies, Inc.(NYSE:WMB) and Access Midstream Partners, L.P.(NYSE:ACMP), Level 3 Communications, Inc. (NYSE:LVLT)and TW Telecom Inc. (NASDAQ:TWTC)and SanDisk Corp.(NASDAQ:SNDK) and Fusion-io, Inc.(NYSE:FIO), Analog Devices, Inc. (NASDAQ:ADI) and Hittite Microwave Corporation (NASDAQ:HITT), The Hillshire Brands Company (NYSE:HSH) and Tyson Foods, Inc.(NYSE:TSN), and Merck & Co. Inc.(NYSE:MRK) and Idenix Pharmaceuticals Inc.(NASDAQ:IDIX) lifted investor sentiment.
Investors were also encouraged by upbeat economic data. Encouraging data on manufacturing activity in the New York region, industrial production, U.S. homebuilders’ confidence, May’s nonfarm payroll report, services sector report and ISM manufacturing data added to the rally.
For the second quarter, the S&P 500, the Dow and the Nasdaq gained 4.7%, 2.2% and 5.0%, respectively. The S&P 500 and the Nasdaq registered a sixth-straight quarter of gains. Separately, the S&P 500 marked its biggest second-quarter gain since 2009. The blue-chip index too recorded gains in five out of the last six quarters.
Investors received better-than-expected corporate earnings results during the quarter. Most economic indicators were also on the positive side. This includes small-business sentiment, ISM Services Index, initial claims numbers, data on factory activities, retail sales, domestic industrial production and durable goods.
Federal Open Market Committee’s (FOMC) indication that central bank will remain flexible when it comes to raising short term interest rates, Federal Reserve Chairwoman Janet Yellen’s indication to keep key lending rates low, Russian President Vladimir Putin’s willingness to discuss measures to ease the Ukrainian crisis and dovish comments from ECB President Mario Draghi were some of the other positives for the quarter.
For the first half of 2014, the S&P 500, the Dow and the Nasdaq were up 6.1%, 1.5% and 5.5%, respectively. The S&P 500 closed at record highs for 22 times during this period. During the first half, airline, pharmaceuticals and utilities stocks gained the most despite harsh winter weather, drop in first-quarter GDP and decline in Treasury yields. Separately, the consumer discretionary sector performed the worst among the S&P 500 sectors for the year.