Markets declined on Wednesday, as disappointing economic data combined with the lack of strong quarterly results weighed the benchmarks down. The job market has not looked rosy and investors’ fears were heightened with signs of a slowing economy. Even after three trading days, the markets have remained in the red for the week, failing to continue the strong gains of last month.
The Dow Jones Industrial Average (DJIA) shed 0.7% to settle at 12,723.58. The Standard & Poor 500 (S&P 500) closed down 0.7% at 1,347.32 and the Nasdaq Composite Index finished the day at 2,828.23, shedding 0.5%. The CBOE Volatility Index surged 2.3% and settled at 17.08. The fear-gauge index has now risen over 17% in the last four trading sessions. For the week, the Dow, S&P 500 and Nasdaq have shed 0.7%, 1.2% and 1.6%, respectively. On the New York Stock Exchange, for every two shares that fell, one share climbed up. Trading volumes on NYSE were at 4.7 billion shares.
Economic data, released yesterday, provided little hope of an economic recovery. Job data came in less than expected and the new orders index plunged to its lowest level since December 2009. As we near the end of the earnings season, with the majority of the significant companies having already reported their results, much of the movement will depend on economic data. As for yesterday, economic data was reason alone to take the markets down and there were no earnings release strong enough to help limit the losses or pull the indices out from negative territory. Earnings reports have been relatively better this quarter compared with the preceding quarter. Last month, robust corporate results lifted the markets and helped the benchmarks posting multi-year highs. The markets now await important economic data on the job sector to be released over the next two days.
The jobs report from the Automatic Data processing (ADP) gave investors more reasons to be worried about. According to the ADP report, the economy could only accommodate an additional 179,000 private sector jobs last month, versus a gain of 200,000 jobs expected by economists. The goods-producing sector added 41,000 jobs and the manufacturing chipped in with 25,000 additional jobs. The highest number of jobs additions was in the services sector, which added 138,000. This data comes ahead of two important job reports that are to be released by the government. The Labor Department will release the weekly data of initial claims on Thursday, followed by monthly labor market data on the next day.
The Institute for Supply Management reported that the new orders index has declined to its lowest level since December 2009, falling to 52.7 from 64.1. The ISM Services Index decreased to 52.8 in April, lower than the expected level of 57.6, after decreasing to 57.3 in March and increasing to 59.7 in February. The index’s complement, the ISM Manufacturing Index decreased to 60.4 on Monday after decreasing to 61.2 in March.
Earnings results came in mixed and companies reporting their results included Kellogg Company (NYSE:K), Time Warner Inc. (NYSE:TWX) and AOL, Inc. (NYSE:AOL). These companies could not return cheerful results and subsequently the shares slid 1.2%, 3.3% and 1.3%, respectively.
Crude prices continued to trade lower and US light crude dropped 1.6% to settle at $109.24. Energy shares shared a gloomy day and shares of companies like Exxon Mobil Corporation (NYSE:XOM), Chevron Corp. (NYSE:CVX), ConocoPhillips (NYSE:COP), Marathon Oil Corporation (NYSE:MRO) and Chesapeake Energy Corporation (NYSE:CHK) slid 0.1%, 1.4%, 1.2%, 1.9% and 1.9%, respectively.
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