Blog

Stocks decline after S&P nears record high

TradingPub Admin | March 15, 2013

Responsive image

U.S. stocks declined slightly on March 15, after the benchmark S&P 500 Index rose close to its record high value and then retreated. 

Falling stocks
The group of stocks had fallen to 1,557.19 at 10:03 a.m. in New York, which was 0.4 percent lower during the day, according to Bloomberg. The Dow Jones Industrial Average was also lower for the day, trading down 0.4 percent at 14,485.02. 

The stocks of major financial services firms Goldman Sachs Group Inc. and JPMorgan Chase & Co. fell by no less than 0.8 percent, which was provoked by federal regulators requesting that they provide new outlines for how they will allocate their capital. 

S&P approaches record
On March 14, the S&P 500 Index rose to more than 1,563, which put the group of stocks less than two points below its record high value of 1,565.15. This group of stocks has surged more than 100 percent since reaching its recent low in March 2009. 

This sharp appreciation has been attributed by many market experts to strong corporate earnings. Data provided by Bloomberg on March 14 indicated that the S&P 500 was trading at 15.4 times reported earnings, which is below the ratio of 16.6 times for the last 10 years. 

'Natural' resistance
"As we hit up against that resistance of all-time highs, it'd be natural to come off of that a little bit, even though the economic data that we've gotten today has been pretty good," Walter Todd, who has around $940 million in assets under management as chief investment officer of Greenwood Capital Associates LLC, told the news source during a phone interview. 

He added that such depreciation is to be expected, as "approaching all-time highs on the S&P is pretty stiff resistance, so not surprised to see it pulling back a little bit." 

Inflation
One piece of economic data that generated significant visibility was the consumer price index, with the latest reading released by the U.S. Bureau of Labor Statistics being released on March 15 indicating a 0.7 percent rise in February, according to CNN Money. This figure exceeded the estimate of a 0.5 percent gain that was provided by Briefing.com. 

The BLS figure for inflation also surpassed the predictions of economists taking part in a Reuters survey, who also provided an estimate of 0.5 percent

Consumer sentiment
Another important economic indicator that generated visibility from market experts was consumer confidence, according to Bloomberg. 

the Thomson Reuters/University of Michigan preliminary sentiment index for March declined to a reading of 71.8 from 77.6 the month before. The figure fell short of the median forecast of economists taking part in a Bloomberg poll, which predicted that the measure would rise to 78. 

Industrial production
Data provided by the Federal Reserve reveals that industrial production rose 0.7 percent in February. This figure was above the prediction of a 0.4 percent gain garnered from market experts polled by Briefing.com, according to CNN Money. 

The figure for this output generated by the nation's mines and factories also managed to surpass the median forecast of economists taking part in a Bloomberg survey. 

Outlook 'uncertain'
BNP economist Bricklin Dwyer emphasized the impact that the sequestration budget cuts are having on the economy, writing in a recent research note that "despite the improvement in recent data, the economic outlook continues to look uncertain as we wait for fiscal tightening to take its toll," according to CNN Money. 

He said that the "seas are calm" at least for now, but that the $85 billion worth of automatic budget cuts will provide inevitable headwinds to the financial markets. 

If you want free quality stock trading education, you can find it through TradingPub, home to some of the top investors and traders in the industry.