Stocks Closed Flat amid Economic Jitters
Published on Thursday, 20 September 2012 16:49 Written by Christopher Lynn
New York, September 20th (TradersHuddle.com) – Stocks closed narrowly mixed, near the flat line, after fluctuating between gains and losses for most of the session. Disappointing global PMI data, along with a drop in Japanese exports spurred growth jitters, which put a damper on investors’ mood and lead to the cautious trade action.
The Dow Jones Industrial Average climbed 19.20 points, or 0.14%. The S&P 500 index lost less than 1 point, or 0.05%, while the NASDAQ dropped 6.66 points, or 0.21%.
The market started with modest losses amid weakness in overseas markets following flash PMI data in China showing contraction for the fifth consecutive month and after trade data showed weaker Japanese exports. In Europe data was mixed to negative with PMI figures pointing to a continuing slowdown. Economic data in the U.S. was also lackluster having little impact in futures ahead of the open.
Weekly jobless claims dropped by 3,000 to 382,000, but still were higher than expected. The four-week moving average on claims had its fifth straight week of increases, hitting its highest level since June. Data in manufacturing was soft, as Markit Flash PMI logged its weakest quarter in 3 years.
Additionally, the Leading Economic Indicators slid in August, signaling sluggish economic growth ahead and the Philadelphia Fed factory activity index showed its fifth straight month of contraction.
The session highlighted a cautious trade, as participants weighed the Fed action against the flurry of data showing Europe in recession and China slowing down. Among the S&P 500 sectors it was also a mixed bag. The industrial sector led the declines impacted by an earnings guidance warning from Norfolk Southern, followed by financials after UBS downgraded a handful of banks. On the flip side defensive sectors like consumer staples, utilities, and healthcare gained.
The industrial sector lost more than 1% in the session, with railroad stock dragging the most. Norfolk Southern (NYSE: NSC) plunged 9% to $66.11 after the company lowered its third quarter earnings guidance amid a drop in coal and merchandise shipments, along with lower fuel surcharge revenue. CSX Corp. (NYSE: CSX) tumbled 5.7% in the session on the news, while rival Union Pacific (NYSE: UNP) fell 3.28%, with participants sparing some of the pain on the name thanks to its lower exposure to coal.
In the financial sector, the session brought weak performance from banks amid a downgrade from UBS and as participants trimmed positions following the recent rally and increased global economic concern. Morgan Stanley (NYSE: MS) lost 2.05% to $17.21, while rival Goldman Sachs (NYSE: GS) lost 1.17%, and Citigroup (NYSE: C) slumped 1.08%. The firm cut these stocks to a Neutral rating from Buy.
Consumer staples were the best performing sector, boosted by a rally in ConAgra Foods (NYSE: CAG). Shares of the food maker rallied to the top of the S&P 500, jumping 6.2% to $27.24, after the company topped earnings and revenue consensus, and boosted its full-year guidance.
But in the consumer discretionary, J.C. Penny (NYSE: JCP) plunged to the bottom of the S&P 500, with shares tumbling more than 11% in the session. CEO Ron Johnson said late yesterday that the second half of the year would be just as painful as the first half, reinforcing that the turnaround will take a long time.
Bed Bath & Beyond (NASDAQ: BBBY) joined as one of the laggards in the S&P 500 after the home furnishings retailer missed earnings expectations for the first time since 2009. The stock tumbled 9.75% to $62.08 after missing earnings by $0.04 per share on revenue that was inline with consensus. Additionally, the retailer reaffirmed fiscal 2013 earnings growth guidance that was below consensus. Canaccord Genuity cut its target price on BBBY to $73 from $75.
In the technology space, Adobe Systems (NASDAQ: ADBE) jumped more than 4%, posting the biggest gain in the sector. The software company reported earnings that were inline with expectations on revenue that missed consensus, while issuing downside earnings guidance for fiscal fourth quarter. Still the stock was upgraded to Outperform from Sector Perform at RBC Capital.
Apple (NASDAQ: AAPL) fell 0.48% to $698.70 a day after setting a new all-time high of $703.99 and ahead of the iPhone 5 officially launching in retail stores. The company was able to break the $700 earlier on the week on news that it sold a record 2 million iPhone 5 on pre-order in the first 24 hours.
Elsewhere, Trulia (NYSE: TRLA), the real estate listing site, surged more than 40% to $24 in its debut at the New York Stock Exchange, following an IPO that priced above expectations, while raising $102 million.
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