Closing Market Summary: Major Averages Slide While Russell 2000 Outperforms
WRAPX The major averages finished the session on a lower note as the S&P 500 lost 0.4% while the Nasdaq shed 0.1%. The Russell 2000, which paced the retreat on Tuesday and Wednesday, added 0.2%, trimming its December loss to 3.5%.
After spending the first half of the session in a steady retreat, the S&P 500 found technical support in the 1772 area. Upon reaching that level, the index reversed sharply, and marched back to its flat line. There was no particular catalyst responsible for the turn, but steady inflows into influential cyclical sectors paved the way for a broad-market rebound. Although the S&P 500 battled back to its flat line, final-hour selling pressured the index to a modest loss.
Financials (unch) and industrials (+0.1%) led the afternoon bounce while energy (+0.5%) joined the rally in progress.
The financial sector was buoyed by regional banks as the SPDR S&P Regional Banking ETF (KRE 39.14, +0.26) jumped 0.7%.
Elsewhere, the industrial space received support from defense contractors with the PHLX Defense Index advancing 0.5%. Transport displayed intraday strength,but the Dow Jones Transportation Average surrendered its gain into the close. The bellwether complex settled flat. For its part, the energy sector finished near its session high even as crude oil surrendered its gain, ending flat at $97.46/bbl.
While most cyclical groups took part in the afternoon climb, the tech sector (-0.7%) struggled to keep pace with the broader market. Networking names pressured the largest S&P 500 sector after Oracle (ORCL 33.60, -0.96) was downgraded at RBC Capital Markets and Morgan Stanley. Oracle fell 2.8% while peers F5 Networks (FFIV 81.99, -2.25) and JDS Uniphase (JDSU 11.80, -0.38) lost 2.7% and 3.1%, respectively.
One tech component, Facebook (FB 51.83, +2.45), was immune to the sellingpressure following news the stock will be added to the S&P 100 and S&P 500. On the countercyclical side, the utilities sector (+0.1%) outperformed while consumer staples (-1.4%), health care (-0.8%), and telecom services (-0.4%)lagged. Notably, the health care space wa pressured by managed-care names like Humana (HUM 100.47, -1.46) and UnitedHealth Group (UNH 71.01, -1.13 while biotechnology rallied. The iShares Nasdaq Biotechnology ETF (IBB 215.72,+1.53) advanced 0.7%. Today's selling contributed to an increased demand for volatility protection,sending the CBOE Volatility Index (VIX 15.61, +0.19) to its highest close since October 15. Trading volume was just above average as 740 million shares changed hands onthe floor of the New York Stock Exchange.
Treasuries registered modest losses, sending the 10-yr yield up two basis points to 2.88%.
Initial claims for the week ending December 7 spiked to 368,000 (consensus 315,000) from 300,000. The Department of Labor said it is still experiencing problems with seasonal adjustment volatility, which means the headline is probably not as disappoint as it seems at first blush.
Separately, the retail sales data produced a cleaner read of things and it haspainted a mostly encouraging picture for personal consumption activity. Retail sales increased 0.7% overall in November following an upwardly revised 0.6% increase (from 0.4%) in October. Excluding autos, retail sales increased 0.4%on top of an upwardly revised 0.5% increase (from 0.2%) in October.
Sales gains were pretty broad-based. The notable exceptions were gasoline station sales (-1.1%), which tracked lower gasoline prices and clothing and accessories stores (-0.2%), which tailed off following a strong 2.6% increase in October.
Also of note, October business inventories increased 0.7% after increasing 0.6% in September. The Briefing.com consensus expected business inventories toincrease 0.3%.
The big upward surprise in inventories resulted from a large surprise in the previously released wholesale inventories report. Total business inventories include manufacturers, merchant wholesalers, and retailers. Typically, manufacturers (0.1%) and wholesalers (1.4%) are known prior to the release,but in this case the wholesaler data was not released until after the consensus made its prediction.
Tomorrow, November PPI and core PPI will be released at 8:30 ET.
o Nasdaq +32.4% YTD o Russell 2000 +29.9% YTD o S&P 500 +24.5% YTD o DJIA +20.1% YTD