Stocks Make Slight Retreat On Investor Anxiety

Investor anxiety was the primary factor keeping stocks slightly in the red on Monday, as demonstrated by the 5.27 percent jump in the Chicago Board Options Exchange Volatility Index (VIX) – also known as the “fear index”.

The 0.4 percent decline in the June pending home sales index from the National Association of Realtors was less significant than the 1.0 percent drop expected by economists, although it did confirm fears that rising interest rates were slowing home sales. The Dallas Fed’s Texas Manufacturing Survey for July sank to 4.4 from June’s 6.5. Economists were expecting a less-significant decline to 6.4.

The disappointing economic news from Texas kept investors worried about the flow of data coming in throughout the week, including PMI reports from both the ISM and Markit Economics, as well as the second quarter GDP reading, and the highly-anticipated July non-farm payrolls report from the Bureau of Labor Statistics.

The week’s big “nail biter” for investors will be the FOMC monetary policy meeting on Tuesday and Wednesday, with the big news at 2:00 as to whether the taper will begin in September. Investor anxiety remains unabated, despite Thursday’s report from “The Fed Whisperer” (Jon Hilsenrath of The Wall Street Journal) that a taper announcement following the July 30-31 monetary policy meeting of the FOMC, appears unlikely.

The Dow Jones Industrial Average (DIA) lost 36 points to finish Monday’s trading session at 15,521 for a 0.24 percent decline. The S&P 500 (SPY) fell 0.37 percent to 1,685.

The Nasdaq 100 (QQQ) declined 0.24 percent to finish at 3,068. The Russell 2000 (IWM) fell 0.75 percent to close at 1,040.

In other major markets, oil (USO) declined 0.21 percent to close at $37.13.

On London’s ICE Futures Europe Exchange, September futures for Brent crude oil advanced by 42 cents (0.39 percent) to $107.59/bbl. (BNO).

August Gold Futures advanced by $5.30 (0.40 percent) to $1,326.80 per ounce (GLD).

Transports lost altitude on Monday, with the Dow Jones Transportation Average (IYT) sinking 1.20 percent.

In Japan, stocks fell as the yen strengthened to 97.64 per dollar during Monday’s trading session in Tokyo. A stronger yen causes Japanese exports to be less competitively priced in foreign markets (FXY). Exporters – and especially the automotive sector – were the big losers as the Nikkei Stock average lost more than three percent after falling nearly the same amount on Friday. The Nikkei 225 Stock Average sank 3.32 percent to 13,661 (EWJ).

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

In China, stocks took significant losses after the National Bureau of Statistics reported that net income for industrial companies increased by only 6.3 percent between June 2012 and June 2013 after the 15.5 percent year-over-year rate reported for May. Meanwhile, the nation’s State Council ordered an audit to determine how much debt was amassed by local governments. Local government debt is seen as the biggest threat to China’s economic growth. The Shanghai Composite Index sank 1.72 percent to close at 1,976 (FXI). Hong Kong’s Hang Seng Index dropped 0.54 percent to finish the session at 21,850 (EWH).

European stocks advanced moderately after mergers were announced by a number of companies. Irish pharmaceutical company Elan will be bought by American OTC remedy giant Perrigo (PRGO). Essilor International entered into an agreement to take full control of Transitions Optical, which it had been operating as a joint venture with American company PPG (remember Pittsburgh Plate Glass?).

Jamie Lee Curtis has apparently done a successful job in convincing American women to clear out their digestive tracts, as Danone – producer of Activia yogurt – saw its share price jump 3.2 percent after beating sales estimates.

The Euro STOXX 50 Index finished Monday’s session with a 0.01 percent dip to 2,741 – remaining above its 50-day moving average of 2,691. Its Relative Strength Index is 60.04 (FEZ).

Technical indicators reveal that the S&P 500 remained above its 50-day moving average of 1,645 despite finishing Monday’s session with a 0.37 percent decline to 1,685. At this point, bears are hoping to see the formation of a head-and-shoulders pattern on the S&P chart. Its Relative Strength Index fell from 65.42 to 61.48. The MACD is on the verge of crossing below the signal line to suggest a further decline.

For Monday, all sectors were in the red except for the materials and utilities sectors, which advanced by 57 percent and 18 percent, respectively. The energy sector trailed the group, with a 0.83 percent decline.

Consumer Discretionary (XLY): -0.52%

Technology: (XLK): -0.13%

Industrials (XLI): -0.27%

Materials: (XLB): +0.57%

Energy (XLE): -0.83%

Financials: (XLF): -0.73%

Utilities (XLU): +0.18%

Health Care: (XLV): -0.29%

Consumer Staples (XLP): -0.22%

Bottom line: Monday was a big day for investor anxiety with a number of important economic reports and the FOMC monetary policy meeting on schedule for the week. Disappointing news from the Dallas Fed concerning manufacturing activity in Texas dampened investor enthusiasm, causing the major stock indices to retreat slightly.

Disclaimer: The content included herein is for educational and informational purposes only, and readers agree to Wall Street Sector Selector's Privacy Policy before accessing or using this or any other publication by Wall Street Sector Selector or Ridgeline Media Group, LLC.