Investor apprehensions surrounding fourth-quarter earnings dragged benchmarks into negative territory on Monday. Indices declined after posting a strong rally in the previous week, during which the S&P 500 had reached its highest level in nearly five years. Alcoa will kick off the fourth-quarter earning season after Tuesday’s closing bell. The health care sector was the only gainer whereas the utilities sector was the biggest loser among the S&P 500 industry groups.
The Dow Jones Industrial Average (:DJI) lost 0.4% to close the day at 13,384.29. The Standard & Poor 500 (S&P 500) declined 0.3% to finish yesterday’s trading session at 1,461.89. The tech-laden Nasdaq Composite Index slipped 0.1% to end at 3,098.81.The fear-gauge CBOE Volatility Index (:VIX) lost 0.3% to settle at 13.79. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 4.78 billion shares, significantly lower than the 2012 daily average of 6.42 billion shares. Declining stocks outpaced advancers on the NYSE; as for 54% stocks that fell, 43% moved higher.
Benchmarks failed to maintain the momentum of last week’s strong rally. Markets began the first trading week of the year with a sharp rally triggered by a resolution to the Fiscal Cliff dilemma. Last week, the labor department reported that the U.S. economy kept up hiring at a moderate pace. Additionally, the ISM non-manufacturing index surged in December. These two positive reports also boosted market sentiment. Consequently, the S&P 500 gained 4.6% and reached its highest level since 2007.
Alcoa Inc. (NYSE:AA) is slated to report its quarterly results after the close on Tuesday. Shares of the company declined 1.7%. According to the Street’s estimates the fourth-quarter earning season will be marginally better than the previous quarter. Analysts’ current estimates for the fourth-quarter corporate results are well below their October’s estimates. According to data from Thomson Reuters, S&P 500 earnings are estimated to increase by 2.8%. During the third-quarter, S&P 500 revenue declined 0.8% and earnings grew only 0.1%. Some corporate majors like Wells Fargo & Company (NYSE:WFC) and Monsanto Company (NYSE:MON) will also report their quarterly results this week.
Meanwhile, ten U.S. banks said they were making two major settlements, together amounting to $20 billion related to claims which arose from the mortgage crisis. Bank of America Corp (NYSE:BAC) will pay around $11.6 billion to Fannie Mae to settle a long standing legal confrontation over bad loans. Separately, ten mortgage service companies will pay in excess of $8.5 billion, which will bring to a close regulator queries related to housing foreclosures.
The health care sector was the only gainer among the S&P 500 industry groups and the Health Care SPDR (XLV) gained 0.3%. Stocks such as Abbott Laboratories (NYSE:ABT), Bristol Myers Squibb Co. (NYSE:BMY), Merck & Co., Inc. (NYSE:MRK), Watson Pharmaceuticals, Inc. (NYSE:WPI) and Endo Health Solutions Inc (NASDAQ:ENDP) added 0.8%, 0.2%, 0.4%, 0.4% and 3.6%, respectively.
The utilities sector had a bad run and was the biggest loser among the S&P 500 industry groups. The Utilities SPDR (XLU) lost 1.0%. Stocks such as Exelon Corporation (NYSE:EXC), NextEra Energy, Inc. (NYSE:NEE), Duke Energy Corp (NYSE:DUK), Xcel Energy Inc (NYSE:XEL) and The Southern Company (NYSE:SO) slipped 1.3%, 0.5%, 0.5%, 1.1% and 1.7%, respectively.
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