Investor apprehensions of a possible government shutdown dragged the major indices lower on Friday. Lawmakers struggled to strike a deal to avoid such a situation. The Dow Jones and the S&P 500 registered their first weekly drop after finishing in the green for four consecutive weeks. A couple of domestic reports were also released on Friday. Both personal income and spending increased in the month of August. On the other hand, consumer sentiment declined to its lowest level in roughly five months. The materials sector was the biggest loser among the S&P 500 industry groups. Consumer discretionary stocks finished marginally in the green.
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The Dow Jones Industrial Average (:DJI) lost 0.5% to close the day at 15,258.24 The S&P 500 slipped 0.4% to finish Friday’s trading session at 1,691.75. The tech-laden Nasdaq Composite Index decreased 0.2% to end at 3,781.59. The fear-gauge CBOE Volatility Index (:VIX) jumped 10.0% to settle at 15.46. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.5 billion shares, considerably lower than 2013’s average of 6.3 billion shares. Declining stocks outnumbered the advancers. For 64% shares that declined, only 32% advanced.
The Dow declined 1.3%, the S&P 500 fell 1.1% and the Nasdaq added 0.2% over the week. Out of the last seven trading sessions, the Dow and S&P 500 have ended in the red for the six trading session. The primary reason behind the stock markets downward movement in recent days is fears that the US Government will run out of cash to pay its bills.
On Friday, the Senate passed the emergency funding bill to avoid a possible government shutdown. But this must be approved by a House dominated by Republicans. President Barack Obama said the Senate had acted sensibly by passing the emergency funding bill. He urged Republicans in the House of Representatives to act in a similar manner. Lawmakers must reach common ground before October 1 to avoid a government shutdown.
On the domestic front, the U.S Department of Commerce reported personal income and consumption expenditures numbers. Personal income increased 0.4% in the month of August, in line with the consensus estimate. Disposable personal income edged up 0.5%. Personal consumption expenditures increased 0.3% in August after gaining 0.2% In July.
On the other hand, consumer confidence declined to its lowest level in nearly five months. According to the Thomson Reuters/University of Michigan, consumer sentiment declined to 77.5 from August’s figure of 82.1. This was below the consensus estimate of 78.1. Other gauges also touched their lowest level since April. The gauge of consumer expectations declined to 67.8. Economists think that consumer sentiment may deteriorate further if higher interest rates begin to slow momentum in the housing market.
Meanwhile, BlackBerry Ltd (NASDAQ:BBRY) reported a huge loss of roughly $1 billion. The company’s revenue declined 45% to $1.6 billion from a year ago. A sizeable portion of these losses is attributable to a write-down of around $934 million for its unsold Z10 smartphones. The company is also planning to lay off 4,500 employees.
The material sector was the biggest loser among the S&P 500 industry groups and the Materials Select Sector SPDR ( XLB) lost 1.2%. Stocks such as E I Du Pont De Nemours And Co (NYSE:DD), LyondellBasell Industries NV (NYSE:LYB), Air Products & Chemicals, Inc. (NYSE:APD), The Dow Chemical Company (NYSE:DOW) and FMC Corp (NYSE:FMC) slipped 0.8%, 0.8%, 1.9%, 0.5% and 0.2%, respectively.
Nine out of the ten sectors in the S&P 500 industry groups ended in negative territory. However, consumer discretionary stocks ended marginally higher. The Consumer Discretionary SPDR ( XLY) gained 0.02%. Stocks such as Time Warner Inc (NYSE:TWX), Comcast Corporation (NASDAQ:CMCSA), Viacom, Inc. (NASDAQ:VIAB), Starbucks Corporation (NASDAQ:SBUX) and Nike Inc (NYSE:NKE) added 2.1%, 1.5%, 0.7%, 0.2% and 4.7%, respectively.
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