Stock Market News for June 23, 2011 - Market News

Markets ended their four-day winning streak, tumbling in the late session, as the Federal Reserve slashed its growth forecast and provided no indications of further economic stimulus. All the benchmarks dropped by around 0.7% during a thin trading session, and investors were mostly spurred to sell their shares.

The Dow Jones Industrial Average (DJIA) closed at 12,109.67, after dropping 0.7%. The Standard & Poor 500 (S&P 500) declined 0.7% to settle at 1,287.17. The Nasdaq Composite Index also shed 0.7% to close at 2,669.19. The fear-gauge CBOE Volatility Index (VIX) dropped modestly to hover below 19. On the New York Stock Exchange, AMEX and Nasdaq, consolidated volumes were 6.2 billion shares, lower than the daily average of 7.58 billion. On the NYSE, for every 17 stocks that declined, only 12 stocks managed to move up.

Among the 30 Dow components, only two stocks, American Express Company (NYSE:AXP) and The Coca-Cola Company (NYSE:KO) managed to finish in the green, gaining 0.6% and 0.2% respectively. None of the 10 sectors in the S&P 500 managed to end in positive territory. A jump in crude prices also failed to lift the energy sector as the Energy Select Sector SPDR (XLE) fund shed 0.3%. However, this enabled the energy sector to limit its losses and technology and consumer-discretionary stocks declined the most.

As expected earlier, at the end of the Federal Reserve’s policy-setting group’s meeting, The Fed kept its rates at record low levels for an extended period, and provided no indications of another round of quantitative easing. Expectations for a second round of quantitative easing had spurred an extended rally the last time around. The economic stimulus plan will end this month but principal payments from Fed holdings will continue.

Moreover, the Fed also stated that the US economy is recovering at a slower pace than expected. According to the Fed, “The slower pace of recovery reflects in part factors that are likely to be temporary, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply-chain disruptions associated with the tragic events in Japan”. The Fed slashed its expectations about economic growth as it forecasts the economy to expand in the range of 2.7% to 2.9% this year. This projection is lower than the April estimate of 3.1% to 3.3%.

Additionally, while the Federal Reserve acknowledged sluggish growth, the committee also warned of higher inflation accompanied by higher unemployment. Federal Reserve Chairman, Ben Bernanke, said: “The recovery appears to be proceeding at a moderate pace though somewhat more slowly than the committee expected and some recent labor market indicators have been weaker than expected”. By the close of this year, the Fed projects unemployment to be between 8.6% and 8.9%.

The Fed estimates inflation increasing at 2.3% to 2.5%, versus the April projection that showed the upper range to be at 2.8%. Excluding energy and food, ‘core inflation’ is estimated to increase 1.5% to 1.8%, versus the April’s forecast of an increase of 1.3% to 1.6%.

Meanwhile, the Federal Housing Finance Agency reported a 0.8% increase in home prices for April. Consequently, housing sector shares moved up and gainers included Lennar Corp. (NYSE:LEN), KB Home (NYSE:KBH), DR Horton Inc. (NYSE:DHI) and PulteGroup, Inc. (NYSE:PHM), increasing by 1.5%, 1.1%, 1.4% and 0.4%, respectively.

U.S. light, sweet crude increased by $1.24 to finish at $95.41 per barrel after the government reported a drop of 1.7 million barrels in crude supplies last week. However, this was not strong enough to prevent the energy sector from finishing in the red, though losses were held in check. Among the decliners were Exxon Mobil Corporation (NYSE:XOM), Chevron Corp. (NYSE:CVX), BP plc (NYSE:BP) and ConocoPhillips (NYSE:COP) and they dropped 0.9%, 0.5%, 0.7% and 0.6%, respectively.

Technology and consumer discretionary sectors were the biggest laggards. Technology stocks that declined include Intel Corporation (NASDAQ:INTC), Advanced Micro Devices, Inc. (NYSE:AMD), NVIDIA Corporation (NASDAQ:NVDA), Oracle Corp. (NASDAQ:ORCL) and Apple Inc. (NASDAQ:AAPL), shedding 1.2%, 2.2%, 1.4%, 1.4% and 0.8%, respectively. Among the retailers, decliners included Macy’s, Inc. (NYSE:M), J. C. Penney Company, Inc. (NYSE:JCP), Dillard’s Inc. (NYSE:DDS) and Target Corp. (NYSE:TGT) and they declined by 0.6%, 2.7%, 2.1% and 1.8%, respectively.

Stock Market News for June 23, 2011 – Market News

SIGN UP TO NEWSLETTER

Free E-Book

Recent Posts