An encouraging retails sales reading coupled with disappointing inventory growth left the benchmarks struggling for a definite direction yesterday. While the Dow managed paltry gains, S&P 500 and Nasdaq slipped meager points. Negligible movement in the benchmarks came along with another day of low volumes and investors opted to term it a ‘fatigued market’.
The Dow Jones Industrial Average (:DJI) ended just 2.71 points or 0.02% higher at 13,172.14. The Standard & Poor 500 (S&P 500) slipped a negligible 0.01% or 0.18 point to finish yesterday’s trading session at 1,403.93. The tech-laden Nasdaq Composite Index was down 0.2% to end at 3,016.98. The fear-gauge CBOE Volatility Index (:VIX) jumped 8.4% to settle at 14.85. Volumes were yet again low with consolidated volumes of roughly 5.16 billion shares on the New York Stock Exchange, Nasdaq and American Stock Exchange, lower than last year's daily average of 7.84 billion shares. The advancing and declining stock on the NYSE were almost even; as for 47% stocks that gained, 49% stocks closed lower.
With not too much of negative around yesterday, interestingly the fear-gauge index made a sharp movement upward. However, one might not read too much into it, as on Monday the index had dropped to five-year low while the markets ended in the red. Generally, VIX moves in the opposite direction of the market and a drop in the fear-gauge index reflects improving investors confidence and vice versa. On Monday, certain market onlookers had opined that investors were not aggressively bothered about the negative situation.
Low volume is another trend that the Street is witnessing over the past few days. On Tuesday also, volumes were sharply lower than average. With regard to this, a cautious stance dominating the mood has largely kept investors away from betting big. Strategists also opined that the volumes will pick up only after investors are back from summer holidays.
Speaking about the cautious stance, investors are awaiting concrete actions by the central banks, and they have focused less on the limited number of headlines. Yesterday too, benchmarks were reluctant to move on either side following a surprisingly encouraging retail sales data and dismal growth in inventories.
Looking at the retail sales data, the Commerce Department reported that it sprung 0.8% in July. This was the best jump since February this year. Also, the 0.8% jump far outpaced the consensus estimates of a 0.3% gain. Separately, Labor Department reported the U.S. producer prices index to have increased 0.3% in July, up from 0.1% gain in June and consensus estimates of 0.2% increase.
The retail sales data was encouraging news not only for the retail sector but obviously for the overall economy as well. The retail stocks enjoyed gains yesterday and the SPDR S&P Retail (XRT) was up 0.2%. Among the retailers, Target Corporation (NYSE:TGT), PriceSmart, Inc. (NASDAQ:PSMT), Wal-Mart Stores, Inc. (NYSE:WMT), Macy's, Inc. (NYSE:M) and the The Bon-Ton Stores, Inc. (NASDAQ:BONT) jumped 1.4%, 0.4%, 0.8%, 1.0% and 3.1%, respectively. Another retailer, The Home Depot, Inc. (NYSE:HD) jumped 3.6% as not only did its quarterly results manage to surpass the Street’s estimates, but the company also upped its guidance.
However the positive mood from this data was offset by a separate report on business inventories. The Commerce Department noted a mere 0.1% rise in business inventories in June to $1.58 trillion. This was lower than May’s growth of 0.3%, but was in line with the consensus estimates. Moreover, the report also noted a 1.1% drop in sales, the largest decline since March 2009.
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