DEFENSIVE names rallied in an otherwise flat day for Wall Street yesterday as investors paused after recent gains and looked ahead to the Federal Reserve’s monetary policy statement.
Investors will eye today’s statement from the US central bank’s Federal Open Market Committee to see whether the Fed will cool down expectations of more easing of monetary policy, which might make it difficult to extend the rally.
Markets were recently rattled after Fed Chairman Ben Bernanke stopped short of giving a strong signal of more stimulus during congressional testimony.
Investors got a shock when China reported its largest trade deficit in at least a decade.
“It isn’t surprising that we would consolidate, given the question marks about China and how far stocks have come,” said Jonathan Lewis, chief investment officer of Samson Capital Advisors in New York. “Risk assets are the focal point in a see-saw, with signs of domestic growth on one side and overseas events on the other.”
Utilities, consumer staples and telecom were the day’s top three sectors, with the S&P utilities index gaining 1.1 per cent. Late Friday, Constellation Energy Group agreed to pay $235m to settle a probe of its wholesale power trading, clearing the way for its $7.9bn sale to rival utility Exelon.
Constellation rose three per cent to $37.23 while Exelon gained 2.3 per cent to $39.81.
The Dow Jones industrial average added 37.69 points, or 0.29 per cent, to 12,959.71 at the close. The Standard & Poor’s 500 Index inched up just 0.22 of a point, or 0.02 per cent, to 1,371.09. But the Nasdaq Composite Index dipped 4.68 points, or 0.16 per cent, to close at 2,983.66.
With the day’s tiny gain, the S&P 500 has closed in positive territory for the past four sessions. The benchmark index is close to nearly a four-year high set two weeks ago and faces strong technical resistance. The CBOE Volatility Index, or VIX, closed at 15.64, its lowest level since May 2011.
Equities had traded modestly lower early in the session as weak data from China cast some doubts over the pace of global economic expansion. Still, gains in groups less tied to growth offset weakness in cyclical sectors.
China’s trade balance plunged $31.5bn into the red in February as imports swamped exports. The data cast some doubt on global economic growth prospects after Friday’s US payrolls pointed to an improving domestic economy.