Benchmarks ended mixed as Monday’s trading session was largely dominated by encouraging developments in the corporate arena. Meanwhile, weak employment figures from China, released on Monday, added to investor apprehensions over a global economic recovery. Of the top ten S&P 500 industry groups, financial stocks led the gains while the utilities sector suffered the most.
The Dow Jones Industrial Average (:DJI) decreased 0.03% to close the day at 14,968.89. The S&P 500 gained 0.2% to finish Friday’s trading session at 1,617.50. The tech-laden Nasdaq Composite Index rose 0.4% to end at 3,392.97. The fear-gauge CBOE Volatility Index (:VIX) lost 1.5% to settle at 12.66. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.3 billion shares, well below 2013’s average of 6.36 billion shares. Advancing stocks outnumbered the decliners. For the 57% that advanced, 40% declined.
The S&P 500 inched up from yesterday’s 1600-level and closed at a record high. The Dow Jones, the S&P 500 and the Nasdaq have increased 14%, 13% and 13% respectively since the start of 2013. In the first quarter of 2013, the rally was largely dominated by robust corporate results, encouraging economic data and the Federal Reserve’s steps to keep interest rates low using monetary stimulus. Investor sentiment improved due to expectations of a global recovery. But in the second quarter, mixed economic reports and mediocre corporate results have gradually dampened expectations of a global economic recovery. Alarming economic conditions in Europe and discouraging numbers from China have added to investors’ woes.
On the international front, the HSBC services Purchasing Managers' Index (PPMIQ) for China fell to 51.1 in April from previous month’s 54.3. This data was followed by news of a decrease in staffing in the service sector for the first time since January 2009. New business orders fell to a 20-month low of 51.5 while the employment sub-index fell to 49.6 in April. The decrease in employment is attributable to downsizing and resignation of employees. These developments came in a week after a report indicated sluggish manufacturing growth in China. In the first quarter of 2013, China’s GDP was 7.7% compared to previous year’s figure of 7.9%. During that period, the country’s GDP fell owing to slow investments and a decrease in factory orders. These economic reports together indicate that a bumpy road awaits China on its path of economic recovery.
On the earnings front, Berkshire Hathaway Inc. (NYSE:BRK.A) gained 1.3% after its earnings and revenue beat the Street’s expectations. Earnings of the company surged 50.5% while the revenue of the company increased 15%. The company’s revenue of $43.87 billion was well ahead of analyst expectations of $42.21 billion. Earnings per share of $2,302 beat the Street’s expectations of an EPS of $1,995.50 a share.
Of the top ten S&P 500 industry groups, financial stocks gained the most. The Financial Select Sector SPDR (XLF) gained 1.1%. Stocks such as Bank of America Corp (NYSE:BAC), Citigroup Inc. (NYSE:C), JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Co. (NYSE:WFC) and Goldman Sachs Group, Inc. (NYSE:GS) increased 5.2%, 1.1%, 1.3%, 0.4% and 2.1%, respectively.
Utilities shares suffered the most for the third consecutive trading day. The Utilities SPDR (XLU) lost 1.4%. Shares such as Duke Energy Corp (NYSE:DUK), Dominion Resources, Inc. (NYSE:D), Xcel Energy Inc. (NYSE:XEL), American Electric Power Company, Inc. (NYSE:AEP) and PPL Corporation (NYSE:PPL) declined 2.1%, 0.7%, 1.6%, 1.2% and 2.3%, respectively.
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