Stocks ended in negative territory on Monday after Treasury yields touched a two-year high on concerns over the future of the bond buying program. The Dow Jones and the S&P 500 registered their first four consecutive days of losses this year. Investors think that a change in the Federal Reserve’s policy could push up the interest rate further. In the absence of any major domestic reports, investors’ apprehensions about Fed trimming the stimulus program dominated the mood. On the international front, Japan’s exports touched a three year high. The health care sector was the only gainer among the S&P 500 industry groups. Energy stocks were the worst performers.
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 0.5% to close the day at 15,010.36. The S&P 500 declined 0.6% to finish yesterday’s trading session at 1,646.06. The tech-laden Nasdaq Composite Index fell 0.4% to end at 3,589.086. The fear-gauge CBOE Volatility Index (:VIX) jumped 5.1% to settle at 15.10. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.22 billion shares, well below 2013’s average of 6.32 billion shares. Declining stocks outnumbered the advancers. For 79% shares that declined, only 19%% advanced.
The central bank’s policy of buying $85 billion worth of bonds every month to keep the interest rates near zero has driven the major indices to multiple highs. Nonetheless, investors have turned cautious over the uncertainty related to when tapering of the stimulus program will occur. Market experts think that the Federal Reserve will trim its massive bond buying program next month. With no major domestic reports set to be released till Tuesday, investors will be eyeing minutes of the Fed meeting, which is scheduled to be released on Wednesday. FOMC minutes may give hints about the future of the stimulus program.
On Monday, the Federal Reserve said big banks need to do a better work in determining how much capital they require to overcome any future financial crisis. The Federal Reserve also said: “Large bank holding companies have considerably improved their capital planning processes in recent years, but have more work to do.”
On the earnings front, Saks Inc (NYSE:SKS) reported fiscal second quarter results yesterday. The department-store operator posted wider-than-expected losses due to rise in overhead costs and weak sales. The company’s Chief Executive Stephen I. Sadove said: “While the second-quarter was our fourteenth consecutive quarter of posting a comparable-store sales increase, our sales growth was modestly below our expectations.” In the current earnings season big retailers like Macy's, Inc. (NYSE:M), Nordstrom, Inc. (NYSE:JWN), Kohl's Corporation (NYSE:KSS) and Wal-Mart Stores, Inc. (NYSE:WMT) have reported weaker-than-expected sales.
On the international front, Japan’s exports increased in July and touched a three-year high due to a weak yen. The country’s exports jumped 12.2% in July from a year ago period. This was slightly below expectations of 13.1%. Exports increased in the United States, Asia and Europe. But the trade deficit increased to 1.02 trillion yen in July.
The health care sector was the only gainer among the S&P 500 industry groups and the Health Care SPDR (XLV) gained 0.2%. Stocks such as Pfizer Inc. (NYSE:PFE), Medtronic, Inc. (NYSE:MDT), Johnson & Johnson (NYSE:JNJ), Stryker Corporation (NYSE:SYK) and Zimmer Holdings, Inc. (NYSE:ZMH) added 0.3%, 0.4%, 1.2%, 0.1% and 0.1%, respectively.
The energy sector was the worst performers among the S&P 500 industry groups and the Energy Select Sector SPDR (XLE) lost 1.6%. Stocks such as Chevron Corporation (NYSE:CVX), Exxon Mobil Corporation (NYSE:XOM), Hess Corp. (NYSE:HES), Murphy Oil Corporation (NYSE:MUR) and ConocoPhillips (NYSE:COP) slipped 1.0%, 1.1%, 2.4%, 0.8% and 2.3%, respectively.
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