Benchmarks ended flat on Monday despite Standard & Poor revising United States’ outlook to stable from negative. Stocks were oscillating between small gains and losses throughout the trading session yesterday. Trading volumes were low and no major economic reports were released yesterday. Investors not only ignored positive news about the U.S economy but also chose to overlook encouraging news about Japan’s economy. Materials sector was the biggest gainer among the S&P 500 industry groups. But home building stocks had a bad day.
The Dow Jones Industrial Average (:DJI) lost 0.1% to close the day at 15,238.59. The S&P 500 fell 0.57 point to finish yesterday’s trading session at 1,642.81. The tech-laden Nasdaq Composite Index inched up 0.1% to end at 3,473.77. The fear-gauge CBOE Volatility Index (:VIX) increased 2.0% to settle at 15.44. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.5 billion shares, considerably lower than 2013’s average of 6.4 billion shares. Declining stocks outnumbered the advancers. For the 42% that advanced, 55% declined.
Markets opened higher on Monday after Standard & Poor's revised U.S’ outlook to stable from negative. But lost its way as the day progressed and kept fluctuating between small gains and losses for the rest of the session. In the previous week, the official jobs numbers report that met expectations reassured investors that the Federal Reserve will not curb its bond buying program acted as a catalyst and the Dow Jones rocketed more than 200 points on Friday.
On Monday, Standard & Poor's raised the U.S sovereign credit rating to stable from negative. According to the rating agency, Federal Reserve’s bond buying program and their continuous effort to keep the interest rates low helped to improve the health of the U.S economy. Standard & Poor's believe Federal Reserve’s efforts to keep the interest rate low via its bond buying program boosted investor sentiment. Additionally, the ratings firm believes Congress’ efforts to reduce the budget deficit by increasing some taxes in the beginning of 2013, has also helped. Incidentally, in the year 2011, when Standard & Poor's cut the government debt rating, markets plunged more than 5% on the first trading day following the downgrade.
In its report Standard & Poor's said: “We believe that the US monetary authorities have both the strong ability and willingness to support sustainable economic growth and to attenuate major economic or financial shocks.” The agency also applauded the Federal Reserve’s “timely and effective actions to lessen the impact of major shocks since the Great Recession.”
On the international front, the Street received some encouraging news about Japan’s economy. But investors chose to ignore these developments. Japan grew at an annual rate of 4.1% in January- March beating the initial estimate of 3.5%. The country’s current account surplus also doubled in April from the year ago period. Investors will closely watch the outcome of The Bank of Japan’s two-day policy meeting which will end on Tuesday.
The materials sector was the biggest gainer among the S&P 500 industry groups and the Materials Select Sector SPDR (XLB) gained 0.5%. Stocks such as Monsanto Company (NYSE:MON), E I Du Pont De Nemours And Co. (NYSE:DD), Praxair, Inc. (NYSE:PX), Praxair, Inc. (NYSE:PX) and Eastman Chemical Company (NYSE:EMN) added 4.5%, 0.1%, 0.5%, 0.3% and 0.2%, respectively.
Homebuilding stocks had a bad day yesterday and the SPDR S&P Homebuilders (XHB) lost 0.8%. Stocks such as The Home Depot, Inc. (NYSE:HD), Toll Brothers Inc (NYSE:TOL), Meritage Homes Corporation (NYSE:MTH) and PulteGroup, Inc. (NYSE:PHM) declined 1.3%, 3.0%, 1.7% and 2.0%, respectively.
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