Benchmarks closed in the red for the second consecutive day as investor concerns about fourth-quarter earnings once again dragged markets lower. Meanwhile, earnings have started coming in and analysts are expecting profits will marginally improve from the previous quarter. Unemployment in the Euro Zone touched its highest level in November 2012 since the creation of the euro in 1999. The home building sector emerged as the biggest gainer among the S&P 500 industry groups.
The Dow Jones Industrial Average (:DJI) lost 0.4% to close the day at 13,328.85. The Standard & Poor 500 (S&P 500) declined 0.3% to finish yesterday’s trading session at 1,457.15. The tech-laden Nasdaq Composite Index slipped 0.2% to end at 3,091.81.The fear-gauge CBOE Volatility Index (:VIX) lost 1.2% to settle at 13.62. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.19 billion shares, lower than the 2012 daily average of 6.42 billion shares. Declining stocks outpaced advancers on the NYSE; as for 51% stocks that fell, 45% moved higher.
Stocks continued to fall on Tuesday as investors remained apprehensive about fourth-quarter corporate earnings. In the previous week, benchmarks began the first trading week of the New Year with a bang as law makers sealed a deal on the Fiscal Cliff issue. The previous week’s rally had pushed the S&P 500 to its highest level since 2007.
According to the Street’s estimates fourth-quarter profits will be marginally better than the third-quarter profits. Current estimates for the fourth-quarter corporate results are well below October’s estimates. According to data from Thomson Reuters, fourth-quarter earnings are estimated to grow by 2.7%. Markets experts are expecting issues like Hurricane Sandy, the Presidential elections and the turmoil over the Fiscal Cliff to spring many surprises during earnings season. During the third-quarter, S&P 500 revenue declined 0.8% and earnings grew only 0.1%.
Meanwhile, Monsanto Company (NYSE:MON) surged 2.7% following its first-quarter results. The company first-quarter earnings came in above the Street’s estimates. The company said profit in the first-quarter was boosted by a growth in seeds sales in Latin America. Monsanto has also increased its earnings outlook for 2013. Alcoa Inc. (NYSE:AA) was scheduled to report after Tuesday’s closing bell.
Monsanto’s better-than-expected earnings report helped the materials sector finish in the green. The Materials Select Sector SPDR (XLB) gained 0.2%. Stocks such as E I Du Pont De Nemours And Co (NYSE:DD), FMC Corporation (NYSE:FMC), PPG Industries, Inc. (NYSE:PPG) and Cabot Corp (NYSE:CBT) added 0.6%, 0.8%, 1.4% and 0.2%, respectively.
On the international front, a report from statistical agency Eurostat revealed unemployment in the Euro zone increased to 11.8% in November from 11.7% in October 2012. Unemployment has touched its highest level since the inception of the euro in 1999. According to the report, around 2 million people lost their jobs in the Euro zone between November 2011 and the same period last year.
On the domestic front, only one report was released on Tuesday. Consumer credit increased by $16.1 billion in November, beating the consensus estimate of $12 billion. Consumer credit surged at a seasonally adjusted annual rate 7% in November. Revolving credit surged at an annual rate of 1% whereas nonrevolving credit surged 9.5% annually.
The housing sector was the biggest gainer among the S&P 500 industry groups and the SPDR S&P Homebuilders (XHB) gained 0.4%. Stocks such as The Home Depot, Inc. (NYSE:HD), Lowe's Companies, Inc. (NYSE:LOW), PulteGroup, Inc. (NYSE:PHM), M.D.C. Holdings, Inc. (NYSE:MDC) and Meritage Homes Corporation (NYSE:MTH) surged 0.6%, 0.1%, 1.0%, 0.1% and 1.8%, respectively.
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