Wall Street pauses after good January
WALL Street closed its best month since October on a flat note yesterday as disappointing economic reports surprised investors after a stream of positive data in recent months.
Stocks have rallied sharply since late last year, partly on hopes the US economy will dodge the effects of a recession in Europe. But data tested that theory yesterday, with US home prices and business activity in the Midwest missing expectations and consumer confidence dropping unexpectedly.
However, the market reversed much of its losses that came after the publication of the data, continuing a pattern that has marked recent trading and is being seen as a sign of resilience. The Standard & Poor’s 500 has fallen for four days, but the losses amount to little more than one per cent.
“Once you start to get some negative numbers, especially around the consumer, it lends to the argument that GDP growth is not really there and it is going to go back to zero,” said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.
Earnings reports continue to paint a muddled picture. Exxon Mobil fell two per cent to $83.74 and was the biggest drag on both the Dow and S&P 500. The US energy company’s profit narrowly beat expectations as rising oil prices offset falling margins for chemicals and fuel, and production fell short of some estimates.
The Dow Jones industrial average dropped 20.81 points, or 0.16 per cent, to 12,632.91. The S&P 500 fell 0.61 points, or 0.05 per cent, to 1,312.40. The Nasdaq Composite Index gained 1.90 points, or 0.07 per cent, to 2,813.84.
Robert Sluymer, a technical analyst at RBC Capital, said depressed US interest rates and a stalling of gains in industrial metal copper is pointing to a short-term reversal in economically sensitive sectors, such as materials and banks, that have led the rally.
According to Thomson Reuters data, of the 204 companies in the S&P 500 that have reported results so far, 59.8 per cent topped estimates, tracking below the beat rate at this stage of the earnings season in recent quarters. Hopes that Greece would reach a deal with private creditors on a debt swap and receive a bailout to sidestep a chaotic default boosted market sentiment initially.
The S&P 500 gained 4.4 per cent in January, its best month since October. The Dow is up 3.4 per cent in it fourth straight month of gains, and the Nasdaq is up eight per cent. Results from drugmakers Pfizer and Eli Lilly both topped expectations.