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Stock Market News for October 25, 2012

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Benchmarks lost out on their initial gains on Wednesday and ended in the red after corporate results dampened sentiment yet again. Also, the Federal Reserve’s announcement that the U.S. economy still needs a push to increase growth and improve the employment situation kept the cautious tone alive. As for economic data, new home sales increased during the month of September.

The Dow Jones Industrial Average (:DJI) slipped 0.2% to close the day at 13,077.42. The Standard & Poor 500 (S&P 500) lost 0.3% to finish yesterday’s trading session at 1,408.76. The tech-laden Nasdaq Composite Index dropped 0.3% to end at 2,981.70. The fear-gauge CBOE Volatility Index (:VIX) dropped 2.7% to settle at 18.33. Total volumes on the New York Stock Exchange were roughly 3.38 billion shares. The decliners on the New York Stock Exchange outpaced advancing stocks; as for 42% stocks that gained, 53% stocks closed lower.

Benchmarks’ initial gains were eroded after the U.S. Federal Reserve’s policy meeting announcement. After the meeting, Fed policy makers said the U.S. economy is growing at a modest pace and need a push to accelerate the growth and improve the job market situation. The Federal Open Market Committee stated: "The Committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions”. The central bank remained committed to its stimulus measures and would do so until the job market improves. The Fed had announced in September that it will buy back mortgage-backed securities worth $40 billion every month till labor conditions improve. Policy makers also emphasized they recommended keeping the interest rate near zero until mid-2015.

Commenting on inflation, the Fed said that it has "recently picked up somewhat, reflecting higher energy prices." As for the housing sector, Fed said the sector “has shown some further signs of improvement, albeit from a depressed level."

Interestingly, on a day when the central bank made positive comments about the housing sector and also commented that household spending “has advanced a bit more quickly”, the U.S. Department of Housing and Urban Development actually reported a jump in new home sales. According to the report, new home sales surged 5.7% from August to a seasonally adjusted annual rate of 389,000 in the month of September; beating consensus estimates of 385,000. Sales of single-family homes reached its highest level since April 2010. The report also stated: “The median sales price of new houses sold in September 2012 was $242,400; the average sales price was $292,400. The seasonally adjusted estimate of new houses for sale at the end of September was 145,000. This represents a supply of 4.5 months at the current sales rate”.

The SPDR S&P Homebuilders increased 0.1% boosted by new home sales data. Stocks such as KB Home (NYSE:KBH), The Ryland Group, Inc. (NYSE:RYL), Lennar Corporation (NYSE:LEN), Standard Pacific Corp. (NYSE:SPF) and Hovnanian Enterprises, Inc. (NYSE:HOV) surged 1.6%, 1.5%, 1.2%, 1.7% and 2.5%, respectively.

Meanwhile, Netflix, Inc. (NASDAQ:NFLX) reported its third-quarter results. The company’s earnings plummeted compared to the year-ago. Quarterly revenues increased but the company reduced its forecast for full year subscriber growth. The company reduced its domestic video streaming subscriber forecast for this year to 4.7-5 million from 7 million. Shares of Netflix plunged 12%. .

Shares of broadcasting and cable TV industry’s stocks fell yesterday. Stocks such as DISH Network Corp. (NASDAQ:DISH), CBS Corporation (NYSE:CBS), The Walt Disney Company (NYSE:DIS), Coinstar, Inc. (NASDAQ:CSTR) and Liberty Global Inc. (NASDAQ:LBTYA) fell by 1.4%, 0.6%, 0.2%, 1.0% and 0.4%, respectively.

The energy sector had yet another bad run yesterday and was the major loser among the S&P 500 industry group. Energy Select Sector SPDR fell 0.8%. Stocks such as ConocoPhillips (NYSE:COP), Exxon Mobil Corporation (NYSE:XOM), Anadarko Petroleum Corporation (NYSE:APC), Devon Energy Corporation (NYSE:DVN) and Noble Energy, Inc. lost 0.2%, 0.3%, 1.1%, 1.1% and 1.5%, respectively.

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