Weaker-than-expected domestic reports provided optimism that the Federal Reserve may continue with its bond buying program, lifting benchmarks higher. The Dow Jones rebounded from its highest one day drop in nearly one month. The Street received a series of domestic reports yesterday. The number of Americans filing for unemployment benefits surprisingly spiked up in the previous week. On the other hand, GDP second estimate for the first quarter of 2013 was revised lower than previously estimated. The financial sector was the major gainer among the S&P 500 industry groups. Consumer staples sector remained the biggest loser for the second consecutive day.
The Dow Jones Industrial Average (:DJI) gained 0.1% to close the day at 15,324.53. The S&P 500 added 0.4% to finish yesterday’s trading session at 1,654.41. The tech-laden Nasdaq Composite Index climbed 0.7% to end at 3,491.30. The fear-gauge CBOE Volatility Index (:VIX) decreased 2.0% to settle at 14.53. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.5 billion shares, marginally above 2013’s average of 6.4 billion shares. Advancing stocks outnumbered the decliners. For the 58% that advanced, 39% declined.
High yielding dividend stocks declined the most on Wednesday on concerns over the Fed’s bond buying program. Benchmark treasury yields increased and touched their highest level in more than a year. This increase occurred after Federal Reserve Chairman Ben Bernanke provided indications that the bond buying program would be tapered off. But tepid domestic data eased fears that the Federal Reserve will curb the bond buying program only gradually. The Federal Reserve’s bond buying program and easy monetary policies by central banks of other countries have lifted benchmarks higher this year.
Meanwhile, the U.S. Department of Commerce released the GDP second estimate on Thursday. The report revealed that the U.S economy expanded at an annual rate of 2.4% in the first quarter of 2013 falling marginally below the previous estimate of an increase of 2.5%. This was also below the consensus estimate of 2.5%. In the fourth quarter economy grew 0.4%. Increase in GDP in the first quarter was mainly a result of positive contributions from personal consumption expenditures (:PCE), private inventory investment, residential fixed investment, non-residential fixed investment, and exports. These positive contributions were somewhat offset by negative contributions from federal government spending and state and local government spending.
According to the U.S. Department of Labor, initial claims increased surprisingly in the previous week. Initial claims jumped 10,000 to 354,000 from the prior’s week revised figure of 344,000. This was also above the consensus estimate of 346,000. The four week moving average increased 6,750 to 347,250 from the previous week’s revised figure of 340,500.
Additionally, the National Association of Realtors reported pending home sales data. According to the report, pending home sales improved marginally in the month of April. The pending home sales index edged up 0.3% to 106.0 in April from the March figure of 105.7. NAR’s chief economist, Lawrence Yun said: “The housing market continues to squeak out gains from already very positive conditions. Pending contracts so far this year easily correspond to higher closed home sales in 2013.”
On the earnings front, Costco Wholesale Corporation (NASDAQ:COST) declared its third quarter results. The company earnings came in above the Street’s estimates but revenue fell short of expectations. The company’s shares slipped nearly 1.0% after the declaration of its quarterly results.
Financial stocks had a good run yesterday and emerged as the biggest gainer among the S&P 500 industry groups. The Financial Select Sector SPDR (XLF) gained 1.2%. Stocks such as JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Co (NYSE:WFC), PNC Financial Services (NYSE:PNC), Goldman Sachs Group, Inc. (NYSE:GS) and Bank of America Corp (NYSE:BAC) added 1.7%, 1.2%, 1.5%, 0.9% and 2.6%, respectively.
Consumer staples sector was the biggest loser for the second consecutive day and the Consumer Staples Select Sect. SPDR (XLP) lost 0.3%. Shares such as The Coca-Cola Company (NYSE:KO), Wal-Mart Stores, Inc. (NYSE:WMT), CVS Caremark Corporation (NYSE:CVS), The Kroger Co. (NYSE:KR) and Archer Daniels Midland Company (NYSE:ADM) declined 1.5%, 0.8%, 0.8%, 0.1% and 0.4%, respectively.
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