S&P 500 Index Lower Amid Weakness in Consumer Staples Sector, NASDAQ Gives Back Earlier Gains

The major U.S. stock indexes are trading mixed shortly after the cash market opening on Wednesday as investors digested several events including the Bank of Japan’s decision to pass on a tweak to its ultra-dovish policy, greater-than-expected declines in U.S. retail sales and PPI data and Microsoft’s decision to lay-off 10,000 workers.

In the meantime, investors are still facing a slew of earnings reports over the next 10-days as they prepare for the Federal Reserve’s interest rate decision on Feb. 1.

At 15:49 GMT, the blue chip Dow Jones Industrial Average is trading 33927.00, down 93.00 or -0.27%. The benchmark S&P 500 Index is at 4013.75, up 4.25 or +0.11% and the technology-weighted NASDAQ Composite is trading 11660.00, up 35.50 or +0.31%.

Weak Stocks Weigh on Dow

Trading conditions are tough at this time with individual stocks weighing heavily on the market weighted Dow. On Tuesday it was Goldman Sachs applying the pressure. Today’s the company is up slightly, but Microsoft, another news stock is down nearly 1%. The biggest loser in the blue chip average is Honeywell International, down 2.83%. One of the best performers is Chevron Corp, up 0.76% on the back of stronger oil prices.

Bad Retail Sales News Driving S&P Consumer Staples Sector Lower

The broad-based S&P 500 is not feeling too much of an effect from individual companies, but some of the sectors are trading weaker.

The Consumer Staples sector is posting the largest loss, off by 1.55%. This is a reaction to a weaker-than-expected U.S. retail sales report. Investors are afraid that this is just the beginning of a deterioration in consumer spending. The price action in the sector suggests consumers are holding on to their money following a slew of recession warnings.

The weakest consumer stocks today are Coca-Cola, Procter & Gamble, McDonald’s and Walmart.

Weaker US Dollar Supporting Materials and Energy Sectors

If there is a bright spot today, it has to be the S&P Materials and Energy Sectors. Many materials and oil products are dollar-denominated so when the greenback weakens, commodities (materials and oil) tend to rise on increased foreign demand.

Today’s U.S. PPI and retail sales data did nothing to alter the idea of a 25-basis point rate hike by the Fed at its Jan. 31 – Feb. 1 meeting. This is weighing on the U.S. Dollar.

The market is also betting on stronger demand from China for materials and crude oil. This is helping to boost the prices of stocks in these sectors.

Stocks to watch in the materials and energy sectors include Freeport-McMoRan, Albemarle Corp, Chevron and Marathon.

Short-Term Outlook

Uncertainty over the strength of the economy, China demand and Fed policy is creating a lot of volatility in the market with investors moving into specific sectors. It looks like a stock-pickers environment which means “All Ships are Not Ready to Rise” yet.