Fundamentals

U.S. Equities Continue Their Descent

U.S. Session Key Developments

• Commodities Take a Hit as Dollar Recovers
• Decrease in New Home Sales Adds to Concern Over Economic Recovery

U.S. equities closed lower for a fourth consecutive day as investors once again fled risky assets such as stocks and commodities for the safety of the U.S. dollar and Treasury securities.  The greenback gained against all of its major crosses except for the Japanese Yen, while the U.S. Treasury continued to find great demand for its debt securities.  Equities around the globe fell as the MSCI World Index of 23 developed nations shed 2.1 percent.  In the morning session, an unexpected decrease in new-home sales by 3.6 percent in September added fuel to investor concern that the seven-month equities rally has outpaced economic fundamentals.  Home builders Lennar Corp. and D.R. Horton dropped over 5.8 percent each on the housing news, while Exxon Mobil and Chevron fell on a drop in crude prices.  Holding up U.S. equities from free-fall is positive news out of earnings season where 82 percent of the companies in the S&P 500 to report earnings have beaten expectations.  Looking forward, all eyes will be on Thursday’s report on third-quarter gross domestic product in the U.S.  Goldman Sachs today cut its forecast for third-quarter U.S. GDP growth to 2.7 percent from 3 percent.

DJIA 30                 9,762.69                   -119.48                         -1.21%
The Dow Jones Industrial Average fell hard after posting a slight gain in yesterday’s session.  Alcoa and Caterpillar were two of the weaker components as they fell 6 percent and nearly 4 percent respectively due to demand concerns that weakened commodities prices.  Telecommunications were once again the bright spot of the index as Verizon added 2 percent and AT&T added a percent.

S&P 500                  1,042.63                    -20.78                          -1.95%
The S&P 500 traded lower as nine of its ten sectors traded fell on the day, with telecommunications the lone exemption.  Overall, eight stocks fell for each that gained and investors showed concern over the strength of the economic recovery.  Discretionary goods had another down day while the financial sector and basic materials sector each dropped over 3 percent.

NASDAQ                 2,059.61                    -56.48                        -2.67%
The tech-heavy NASDAQ was once again the worst performing index, falling over 2 percent.  Apple, Microsoft, and Intel stock all fell over 2 percent on the day.  Apollo Group shed nearly 18 percent on news of a legal suit that could cost the firm over $80 million.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com