[Chart courtesy of MarketWatch.com]
U.S. equity indexes declined for a third straight session today amid the continued uncertainty surrounding the Federal Reserve’s timing over tapering and the U.S. fiscal fight brewing in Washington.
Meanwhile, treasuries ended higher following a preliminary report that showed growth in U.S. manufacturing activity unexpectedly decelerated. Technology stocks, however, found some support from Apple’s announcement of its weekend-record-sales of the new iPhones, while Blackberry Limited entered into a letter of intent agreement with a consortium lead by Fairfax Financial Holdings Limited to acquire the smartphone maker in a transaction worth roughly $4.7 billion.
The preliminary Markit US Manufacturing PMI Index declined to 52.8 in September, from 53.1 in August, compared to the improvement to 54.0 that economists had expected. The report showed although output grew at a faster rate, expansion in new orders slowed, while new export orders fell back below 50 and inventories remained in contraction territory. This was the second-straight monthly decline, but a reading above 50 denotes expansion in manufacturing activity, the economy is showing signs of alleged stealthy acceleration.
We’ve seen a surge in major merger and acquisition activity, indicating rising confidence by executives. This is a key factor as business investment has been lagging of what would be expected at this stage in the cycle.
Seven of ten sectors finished in the red while technology (+0.3%), telecom services (+0.1%), and utilities (+1.2%) outperformed. The outperformance of Apple masked the losses among many other top tech components. Google lost 1.8% and the newest Dow member Visa fell 1.3%. Just like Visa, the other two new Dow additions-Goldman Sachs and Nike ended in the red.
Goldman Sachs settled behind the remaining Dow components as the financial sector (-1.5%) was the only group that ended with a loss larger than 1.0%. The broad weakness was brought on by a Financial Times report indicating Citigroup is likely to record a significant drop in third quarter trading revenue.
Also of note, the industrial sector (-0.1%) outperformed as two of its top components, Boeing and General Electric, both gained near 1.0%. However, transportation companies kept the sector from turning positive as the Dow Jones Transportation Average lost 0.6%. Countercyclical sectors ended mixed as utilities and telecom services ended ahead of the S&P while health care (-0.7%) lagged and consumer staples (-0.5%) ended in-line.
Our Trend Tracking Indexes (TTIs) pulled back slightly with the Domestic TTI ending the day at +3.38% while the International TTI finished at +7.42%.