A strong market rally running through the week ended with a whimper on Friday, as dismal consumer data weighed on investor sentiment and benchmarks closed on a flat note. Friday’s choppy session, which affected the benchmarks only marginally, did not stop the markets from recording their best weekly performance since December 2011.
The Dow Jones Industrial Average (DJI) wavered between small gains and losses to finally settle 0.2% lower at 13,232.62. The Standard & Poor 500 (S&P 500) edged up 0.1% to finish Friday’s trading session at 1,404.17. The tech-laden Nasdaq Composite Index finished almost at the same levels as it began the day’s session, dropping a mere 0.04% to close at 3,055.26. Though the benchmarks hardly experienced any movement, the fear-gauge CBOE Volatility Index (VIX) declined by 6.2% to settle at 14.47. On the New York Stock Exchange, for 44% stocks that advanced, 53% stocks trade lower, while the remaining 3% stocks were left unchanged.
Markets struggled for direction on Friday and kept hovering between small gains and losses. In the absence of any major developments, the Thomson Reuters/University of Michigan’s consumer survey data dominated the highlight of the day, which unfortunately had dismal figures on offer. The Thomson Reuters/University of Michigan’s preliminary reading of consumer sentiment dropped to 74.3 from 75.3 in February, 2012. Consensus for the current period had projected the consumer sentiment at 76. Thus, the figure shows an economic surprise of -1.7 or -2.24%.
The report dampened sentiment and the Consumer SPDR Select Sector Fund (XLY) was down 0.3%. Among retail stocks, J.C. Penney Company, Inc. (NYSE:JCP), Target Corporation (NYSE:TGT), Wal-Mart Stores, Inc. (NYSE:WMT), McDonald’s (NYSE:MCD) and Lowe’s Companies, Inc. (NYSE:LOW) dropped 2.0%, 0.6%, 0.6%, 0.4% and 0.9%, respectively.
Meanwhile, the U.S. Bureau of Labor Statistics came out with the latest Core Consumer Price Index (CPI) report where higher crude prices had a played significant role to play. According to the labor Department, Consumer Price Index for All Urban Consumers (CPI-U) gained 0.4% in February on a seasonally adjusted basis. Before seasonal adjustment, the all item index gained 2.9% over the past 12 months. According to the report: “The gasoline index rose sharply in February, accounting for over 80 percent of the change in the all items index. The gasoline increase led to a 3.2 percent rise in the energy index despite a decline in the index for natural gas”. Higher gasoline prices is always a matter of concern for any economy. Unfortunately, crude prices have increased sharply in recent days, sparking off widespread fears about higher inflation and the subsequent impact on economic recovery. Excluding food and energy, the all items index rose 0.1% in February.
Meanwhile, industrial production remained unchanged in February according to the Board of Governors of the Federal Reserve System. The report stated: “Manufacturing output moved up 0.3 percent in February. Within manufacturing, the index for motor vehicles and parts fell 1.1 percent after jumping 8.6 percent in January, but the index for manufacturing excluding motor vehicles and parts increased 0.4 percent in February. Production at mines fell 1.2 percent, while the output of utilities was unchanged. At 96.2 percent of its 2007 average, total industrial production for February was 4.0 percent above its year-earlier level”. Consensus estimates expected the industrial production to rise by 0.4%.
While a lackluster Friday hardly affected the benchmarks, it was still the best weekly performance for the benchmarks since December 2011. The robust rally through the week helped the Dow, S&P 500 and the Nasdaq post gains of 2.4%, 2.4% and 2.2%, respectively, for the week.
Additionally, benchmarks shattered multi-year old records and established new milestones. On Tuesday, robust economic data spurred on the Dow to its highest level since the end of 2007. Alongside, the Nasdaq settled above 3, 000 for the first time since the fag end of the Dot-com bubble. On Thursday, S&P 500 closed above 1400 for the first time since the Great Recession. Also on Thursday, the S&P 500 finished above 1, 400, Dow settled above 13, 000 and Nasdaq closed above 3, 000 on the same day for the very first time.
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