Positive retail sales data helped the Dow finish in the green, while S&P 500 ended almost flat and Apple’s detrimental trend dragged down the Nasdaq. Additionally, concerns related to Spain’s surging borrowing costs remained an overhang, limiting the gains for the blue-chip index and preventing the others from ending in positive territory.
The Dow Jones Industrial Average (:DJI) jumped 0.6% and closed yesterday’s trading session at 12,921.41. The Standard & Poor 500 (S&P 500) moved down marginally, by 0.05% to close hardly unchanged at 1,369.57. The tech-laden Nasdaq Composite Index dropped 0.8% and was down to 2,988.40. The fear-gauge CBOE Volatility Index (:VIX) closed unchanged from the previous day at 19.55. Consolidated volumes on the New York Stock Exchange, the American Stock Exchange and Nasdaq were roughly 6.25 billion shares, lower than last year's daily average of 7.84 billion. For 55% shares on the NYSE that ended on a higher note, 41% stocks dropped to the red zone. The remaining 4% stocks were left unchanged.
It was the better-than-expected retail sales data, released by the U.S. Department of Commerce that helped Dow to finish in the green for the day. According to the report: “The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for March, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $411.1 billion, an increase of 0.8 percent (±0.5%) from the previous month and 6.5 percent (±0.7%) above March 2011”. The 0.8% jump in retail and food services sales was way higher than the consensus estimates of a 0.4% increase.
Among the 30 Dow components, 24 ended in the green. Tech stocks, Hewlett-Packard Company (NYSE:HPQ) and International Business Machines Corp. (NYSE:IBM) were among the six Dow components that ended lower and they dropped 1.1% and 0.6%, respectively. The tech sector definitely had a bad run yesterday, as was evident by the 1.5% fall in the Technology Select Sector SPDR (XLK) and the drop in the Nasdaq.
It was Apple Inc.’s (NASDAQ:AAPL) 4.2% decline that dented the tech-laden index. Even its third-biggest component Google Inc. (NASDAQ:GOOG) slumped almost 3%. The search-engine giant went to trial over a copyright issue regarding Android against Oracle Corporation (NASDAQ:ORCL). Thus, the near 3% fall in Google helped Apple to ensure that the Nasdaq finished in the red. More importantly, the two tech-giants also dragged Nasdaq below its key level of 3, 000.
Nasdaq outperformed the fellow benchmarks in the first quarter of this year, and during this period Apple had scored its all-time high. On January 3, 2012, the first trading day of this year, Apple closed at $411.23 and since then it soared to an all time intra-day high of $644.00 on April 10, a day after recording its all-time closing high of $636.23. Apple accounts for 12% of Nasdaq and is the most valuable company globally.
Meanwhile, the Federal Reserve Bank of New York released the monthly survey of manufacturers in New York State, which reported only a modest improvement in manufacturing activity in New York State. The report noted: “Although the general business conditions index fell fourteen points, it remained positive at 6.6. The new orders and shipments indexes also remained positive, but showed only a small increase in orders and shipments. The prices paid index inched downward but remained high, and the prices received index climbed six points to 19.3”. The 6.6 reading of general business conditions index was sharply lower than consensus estimates of 20.5.
Taking a further toll on market sentiment was Spain’s surging borrowing costs. With wide spread apprehensions and doubts over Spain’s ability to repay its debts, the nation’s bond yields moved over 6%, sparking fears that the country was on track to seek a bailout. The 10-year government bond yield rose to 6.1% and is moving closer to the ‘unsustainable’ 7% mark. Investors are well aware of the consequences of surging borrowing costs. Not long ago Ireland, Portugal and Greece suffered economic turmoil with their borrowing costs reaching ‘unsustainable levels’. Ultimately, the euro-zone nations had to resort to monetary aid.
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