The Dow and S&P 500 extended their losing streak into a fourth successive day as strong private sector labor data intensified apprehensions that the Federal Reserve would soon begin trimming its economic stimulus package. Stocks traded lower for most of the session before make up for some losses ahead of the closing bell. The prevailing mood of uncertainty meant that there was little trading action as investors await key nonfarm payroll data to be released on Friday. The materials sector was the biggest gainer among the S&P 500 industry groups while industrials lost the most.
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The Dow Jones Industrial Average (:DJI) lost about 0.2% to close the day at 15889.77. The S&P 500 declined 0.1% to finish yesterday’s trading session at 1792.81. The tech-laden Nasdaq Composite Index increased 0.02% to end at 4038.00. The fear-gauge CBOE Volatility Index (:VIX) rose 1.0% to settle at 14.70. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.3 billion shares. Declining stocks outnumbered the advancers. For 60% shares that declined, only 37% advanced.
Many market watchers were expecting the Federal Reserve to start tapering its stimulus program by March next year. On the contrary, the encouraging nature of recently released economic reports has given rise to the view that tapering may happen sooner rather than later.
Strong employment data from Automatic Data Processing, Inc. (NASDAQ:ADP) brought little cheer to the markets. Numbers were on the brighter side with private sector job additions increasing beyond 200K for the first time in about 12 months. However, instead of improving sentiment the report intensified apprehensions that the central bank would reduce bond purchases sooner than expected.
According to the National Employment Report, the U.S. nonfarm private sector employment added 215,000 jobs in November. This was higher than the expected increase of 173,000 jobs. Small business added 102,000 jobs, medium business added 48,000 jobs and 65,000 additions were made by large business. November’s numbers come after two consecutive months of job gains of 185,000 each.
Separately, the U.S. Census Bureau and the Department of Housing and Urban Development reported that sales of single homes increased to 444,000, up 25.4% from September’s revised figure of 354,000. This was also above the consensus estimate of 425,000.
The ISM non-manufacturing index came in at 53.9% for November. This is 1.5% lower than October’s reading of 55.4%. This was also below the consensus estimate of 55.8%. The Non-Manufacturing Business Activity Index decreased to 55.5%, while the new orders index decreased marginally, by 0.4%, to 56.4%. The Employment Index also decreased 3.7% to 52.5%.
Separately, the Federal Reserve’s Beige Book noted that the U.S. economy continued to expand at a modest to moderate pace starting from early October through the mid-November. Seven districts reported moderate growth while four cities cited modest growth. Expansion in manufacturing activity continued in most districts due to gains in from motor-vehicles and high-technology sectors. Additionally, demand for professional business services has ranged from stable to moderate, primarily for computer technologies. Retail spending reports were positive. Looking ahead toward the holiday shopping season, retailers are hopeful and cautious at the same time.
The materials sector was the biggest gainer among the S&P 500 industry groups on Wednesday. The Materials SPDR (XLB) gained 0.5%. Stocks such as Monsanto Company (NYSE:MON), The Dow Chemical Company (NYSE:DOW), Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), PPG Industries, Inc. (NYSE:PPG), and Air Products & Chemicals, Inc. (NYSE:APD) increased 0.5%, 0.4%, 0.9%, 0.7% and 0.3%, respectively.
The industrials sector was the biggest loser among the S&P 500 industry groups on Wednesday. The Industrials SPDR (XLI) lost 0.4%. Stocks such as United Technologies Corporation (NYSE:UTX), The Boeing Company (NYSE:BA), 3M Co (NYSE:MMM), Union Pacific Corporation (NYSE:UNP), and United Parcel Service, Inc. (NYSE:UPS) decreased 0.7%, 0.4%, 0.1%, 0.7% and 0.2%, respectively.
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