Market Wrap for Wednesday, January 30: Stocks Fall as Economy Contracts in Q4

The U.S. stock market lost some ground on Wednesday after the fourth-quarter GDP report showed that the economy shrunk by 0.1 percent in the fourth quarter. This compares to consensus estimates which called for growth of 1 percent.

Volume remains light and investors are primarily focusing on earnings season. It will be interesting to see if volatility picks up in coming days after the surprising GDP figure.

Major Averages

The Dow Jones Industrial Average fell 44 points, or 0.32 percent, to close at 13,910.

The S&P 500 lost 6 points, or 0.39 percent, to $1,502.

The Nasdaq Composite shed a little more than 11 points, or 0.36 percent, to 3,142.

Economic Reports

The major economic report on Wednesday was the GDP figure for the fourth quarter. The economy contracted during the period, for the first time since Q2 2009. GDP fell 0.1 percent, which was well below the consenus which called for a rise in GDP of 1%.

The headline figure was not as bad as it looked, however, as most of the decline was attributable to a fall in government spending. Key areas such as consumption and fixed investment actually saw an acceleration in the quarter.

Other reports included the ADP Employment change and the FOMC rate decision. The ADP job report showed that the economy added 192,000 jobs in January versus consensus estimates of 175,000. The Federal Reserve held interest rates near zero as expected.

Commodities

Crude oil was higher on Wednesday with NYMEX crude futures, the U.S. benchmark, trading up 0.44 percent to $98.00. Brent crude futures added 0.56 percent to $115.00. Natural gas snapped a losing streak, climbing 2.39 percent to $3.23.

Precious metals were also higher on the session. COMEX gold futures were last up 0.87 percent to $1,677. Silver futures had climbed 2.66 percent and were last trading at $32.02. In the industrial metals, copper was last up 1.60 percent.

Most of the grains were higher on Wednesday as corn and wheat both surged better than 1 percent. In soft commodities, orange juice concentrate contracts were up more than 4 percent. Sugar was almost 2 percent higher and cocoa and coffee both fell on the day.

Bonds

The iShares Barclays 20+ Year Treasury Bond ETF (NYSE:TLT) fell around 0.15 percent on the day to $116.78.

Bond yields were mostly flat on the day, with the exception of the 2-Year Note which saw its yield fall one basis point to 0.27 percent.

Currencies

The U.S. dollar was lower on Wednesday along with the stock market. The PowerShares DB US Dollar Index Bullish ETF (NYSE:UUP), which tracks the performance of the greenback versus a basket of foreign currencies, lost 0.41 percent to $21.64.

The closely watched EUR/USD pair was 0.57 percent higher at last check to $1.3564. The dollar rose against the Yen, with the USD/JPY last trading up 0.34 percent.

Among the other significant movers was the AUD/USD which fell 0.45 percent.

Volatility and Volume

The VIX spiked on Wednesday as stocks fell in afternoon trade. The widely watched volatility index added around 7 percent on the session to 14.24.

Volume remained low on the day. Only around 101 million SPDR S&P 500 ETF (NYSE:SPY) shares traded hands compared to a 3-month daily average of 137 million.

Stock Movers

Facebook (NASDAQ:FB) rose around 1.50 percent ahead of a scheduled earnings report after the closing bell.

Research in Motion (NASDAQ:RIMM) fell 12 percent after releasing its much anticipated BlackBerry10 line of smartphones.

Freescale Semiconductor (NYSE:FSL) surged almost 15 percent after its quarterly earnings results.

Isis Pharmaceuticals (NASDAQ:ISIS) climbed almost 10 percent after the FDA approved a drug developed by the company called Kynamro.

Meritor (NYSE:MTOR) lost almost 13 percent after releasing disappointing earnings results.

Commvault Systems (NASDAQ:CVLT) rose around 9 percent after reporting its fiscal third-quarter earnings.

Chesapeake Energy (NYSE:CHK) jumped more than 6 percent to $20.15 after the company said that CEO Aubrey McLendon would be stepping down.

Ventrus Biosciences (NASDAQ:VTUS) lost almost 23 percent after announcing a share offering.