Benchmarks extended their losses to a fifth consecutive trading day due to fears that the US Government will run out of cash to pay its bills. A decline in shares of Wal-Mart stores also dragged the Dow Jones into negative territory. Meanwhile single family home sales released yesterday came in line with estimates. Of the top ten S&P 500 industry groups, financials stocks gained the most. However, health care stocks suffered maximum losses.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.
The Dow Jones Industrial Average (:DJI) lost 0.4% to close the day at 15,273.26. The S&P 500 decreased 0.3% to finish yesterday’s trading session at 1,692.77. The tech-laden Nasdaq Composite Index declined 0.2% to end at 3,761.10. The fear-gauge CBOE Volatility Index (:VIX) decreased 0.5% to settle at 14.01. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.9 billion shares, below 2013’s average of 6.24 billion shares. Declining stocks outnumbered the advancers. For 49% shares that declined, 48% advanced.
Investor concerns over two important deadlines pushed benchmarks into negative territory. In October, the Congress will have to clear “stop-gap funding.” Additionally, the debt ceiling has to be raised since the Government is running out of cash to pay its bills. If it fails to raise the debt ceiling, the Government might default on its own debt, directly affecting the country’s sovereign credibility. Unless funds are authorized to pay its bills, the Government might shut down as early as October 1.
According to the US Department of Commerce, sales of new family single houses for the month of August came in at 421,000. This is 7.9% above previous month’s reading of 390,000 and in line with the consensus estimate. The rate of the sale of single new homes is tepid and at its lowest level in light of high mortgage rates.
Another report released by the US Department of Commerce revealed that new orders for manufactured goods for the month of August increased marginally by 0.1%. This is, however, better than the consensus estimate of a decline of 0.1%. On a monthly basis, August’s reading of 0.1% is well above July’s reading of a decline of 8.1%. Shipments of manufactured durable goods witnessed a marginal increase of 0.9% while shipments of transportation equipment increased 1.5%. Inventories of manufactured goods and transportation equipment increased 0.1% and 0.3%, respectively. New orders for nondefense and defense capital goods declined 0.2% and 6.5%, respectively. Mixed figures in shipments and inventories indicate a lower level of investment spending.
Major benchmarks were also affected by the fact the biggest retail company in the world and the US economy’s barometer, Wal-Mart Stores, Inc. (NYSE:WMT) reduced orders to its suppliers. In an email received by Bloomberg News, Wal-Mart said “We are looking at reducing inventory for Q3 and Q4.”
Financials stocks gained the most among the top ten S&P 500 industry groups. The Financials SPDR ( XLF) gained 0.6%. Stocks such as JPMorgan Chase & Co (NYSE:JPM), Bank of America Corp (NYSE:BAC), Wells Fargo & Co (NYSE:WFC), Citigroup Inc (NYSE:C) and PNC Financial Services Group Inc (NYSE:PNC) gained 2.7%, 0.4%, 0.2%, 0.6% and 0.5%, respectively.
Health care stocks suffered maximum losses. The Health Care SPDR ( XLV) lost 0.7%. Stocks such as Johnson & Johnson (NYSE:JNJ), Medtronic, Inc. (NYSE:MDT), Stryker Corporation (NYSE:SYK), CONMED Corporation (NASDAQ:CNMD) and Zimmer Holdings, Inc. (NYSE:ZMH) lost 1.3%, 1.2%, 2.9%, 0.9% and 2.3%, respectively.
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