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Stock Market News for August 13, 2012

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Friday marked another session of paltry gains for the markets where volumes reached significantly low levels. In the absence of any major headlines, benchmarks traded in the red throughout the session, eking out gains only during the closing moments. Even the IPO of English football major Manchester United saw little excitement. Meanwhile, trade data from China was discouraging, generating fears about the global economy. However, even paltry gains were enough to secure a sixth straight day of gains for the S&P 500’s sixth; while the Dow registered a fifth-straight week of gains.

The Dow Jones Industrial Average (:DJI) gained 0.3% and was up to 13,207.95. The Standard & Poor 500 (S&P 500) edged up 0.2% to finish Friday’s trading session at 1,405.87. The tech-laden Nasdaq Composite Index added a meager 0.1% to end 2.22 points higher at 3,020.86. The fear-gauge CBOE Volatility Index (:VIX) dropped 3.5% to settle at 14.74. Consolidated volumes on the New York Stock Exchange, the American Stock Exchange and Nasdaq were 4.97 billion shares, sharply lower than last year's daily average of 7.84 billion. Advancers outpaced the decliners in the NYSE; as for 52% stocks that gained, 44% stocks closed in the red.

For the past couple of days the benchmarks have been reluctant to move too far in either direction. Investors have adopted a cautious stance awaiting concrete action from the central banks. European Central Bank head Mario Draghi is yet to live up to his vow of doing “whatever it takes” to preserve the Euro-zone. On the domestic front also, investors await the U.S. Federal Reserve’s next move on a possible third round of quantitative easing (QE3).

With a cautious stance dominating the mood, investors have refrained from betting big and volumes have been drastically low. Strategists opined that the volumes will pick up only after investors are back from summer holidays. Meanwhile, investors have also been balancing their hopes for economic measures from central banks against dismal data from China. Eventually, volumes remained low while markets struggled to find a definite direction.

Coming to dismal Chinese economic data, China’s General Administration of Customs said both export and import growth decelerated in China. According to the report, imports were up 4.7% to $151.8 billion 1% higher than year-ago levels to $176.9 billion in July. Imports were estimated to grow at 7.2%, while export growth was projected at 8.6%. Thus, the reported figures were sharply below estimates. The meager 1% rise in exports was also the lowest since January. Trade surplus slumped to $25.1 billion in July from prior month’s $31.7 billion.

Analysts opined that the world’s second largest economy was feeling the effects of weak demand from U.S. and Europe. The report comes just a day after the nation reported factory output growth had sunk to its lowest level in over three years. Also, ‘the finished goods inventory sub-index of the manufacturing purchasing manager’s index moved down to 48 in July as against June’s reading of 53.2, thus suggesting a contraction. Taken together, the economic situation in China is grim and the government has plunged into action to intervene..

Economic reading from the domestic front was also anything but encouraging. The U.S. Bureau of Labor Statistics reported a 0.6% fall in import prices in July, as against consensus estimates of a 0.2% rise. This was the fourth-consecutive month of declines.

In line with the lackluster trading session, the English football club giant MANCHESTER UNITED PLC (NYSE:MANU) had a dull debut on the NYSE. Soccer fans are feeling the excitement as the English league prepares to kick off in a month, but investors showed little interest in the initial public offering. The stock had a price tag of $14 a share, lower than the expected price of $16 to $20. Earlier, Financial Times had quoted a close source saying that “Institutional investors have shown strong interest”. However, the stock limped through the session and ended flat. A report from CNBC noted that analysts viewed the “debt-ridden” club, which boasts the likes of star players including Wayne Rooney and Nani, to be “overvalued”.

Manchester United’s dull debut comes after social networking bellwether Facebook, Inc. (NASDAQ:FB) also had a disappointing start. Meanwhile, Facebook’s Chief Financial Officer David Ebersman was reported to be meeting investors ahead of the termination of the stock sales ban. Shares of the company jumped 3.8%.

Separately, Bloomberg reported that International Business Machines Corp. (NYSE:IBM) will be taking over the enterprise division of embattled Research In Motion Limited (USA) (NASDAQ:RIMM). Shares of IBM gained 0.4%, while RIMM’s shares jumped 6.3%. Separately, data suggesting an eighth consecutive month of decline in video game industry sales affected some of the related stocks. Activision Blizzard, Inc. (NASDAQ:ATVI), Electronic Arts Inc. (NASDAQ:EA) and Zynga Inc (NASDAQ:ZNGA) dropped 0.1%, 0.3% and 2.0%, respectively. However, Take-Two Interactive Software, Inc. (NASDAQ:TTWO) and International Game Technology (NYSE:IGT) jumped 6.4% and 2.3%, respectively.

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Read the analyst report on TTWO

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