Closing Stock Market SummaryThe S&P 500 declined 0.1% on Thursday, as risk sentiment remained pressured by growth concerns, ongoing selling in large-cap technology stocks, and heightened volatility. The Dow Jones Industrial Average lost 0.3%, while the Nasdaq Composite gained 0.1% and Russell 2000 gained 1.2%.
The price action was a big focal point today, with the S&P 500 being up as much as 0.8% in the morning and then down as much as 1.9%, which took the benchmark index within a few points of bear market territory. The latter is often defined as a decline of 20.0% or greater from a recent high.
Flirting with bear market territory might have triggered a mechanically-oriented bounce that lifted six of the 11 S&P 500 sectors into positive territory by the close. The health care (+0.9%), consumer discretionary (+0.8%), and real estate (+0.7%) sectors outperformed in positive territory.
The information technology sector (-1.1%), however, was a heavy drag on the market and for sentiment, too, considering Apple (AAPL 142.56, -3.94, -2.7%) continued to struggle after losing its spot as the largest company in the world by market cap yesterday. The utilities sector (-1.2%) was the weakest link.
Growth concerns, meanwhile, lingered as Russia threatened retaliation if Finland joins NATO as planned, the IEA lowered its global growth demand forecast, and Walt Disney (DIS 104.31, -0.90, -0.9%) warned that Disney+ subscriber growth is apt to slow down in the second half of the year. On a related note, Disney missed top and bottom-line estimates.
The Treasury market continued to signal growth concerns via another drop in rates, which was also a byproduct of some safe-haven positioning amid the market volatility and peak inflation expectations following the Producer Price Index (PPI) for April. The PPI report featured a better-than-feared core PPI reading along with a moderation in the year-over-year increases.
The 2-yr yield fell 13 basis points to 2.51%, and the 10-yr yield fell ten basis points to 2.82% (recall, it hit 3.20% early this week). The U.S. Dollar Index remained strong in these uncertain times, rising 0.9% to 104.80 -- setting a fresh 20-year high. WTI crude futures rose 1.2%, or $1.26, to $106.40/bbl despite the IEA's reduced forecast.
As for the data, the Producer Price Index for final demand increased 0.5% m/m, as expected, while the index for final demand excluding food and energy, increased just 0.4% (consensus 0.6%). On a year-over-year basis, they were up 11.0% (versus 11.5% in March) and 8.8% (versus 9.5% in March), respectively.
Looking at some positive news, St. Louis Fed President Bullard (FOMC) and San Francisco Fed President Daly (non-voter) said they prefer 50-bps rate hikes instead of 75-bps, and Treasury Secretary Yellen said she doesn't think the huge losses in stable coins will cause systemic issues for the financial system. On a related note, Fed Chair Powell was confirmed by the Senate for a second term.
Separately, the session was filled with short-covering activity, which was notably evident in the sharp gains in Bumble (BMBL 22.36, +4.73, +26.8%) and Rivian (RIVN 24.30, +3.70, +18.0%) following their positive earnings reports, as well as the surge in Carvana (CVNA 37.40, +7.40, +24.7%) despite being downgraded to Hold from Buy at Stifel.
Reviewing Thursday's economic data:
- The Producer Price Index for final demand increased 0.5% month-over-month in April, as expected, following an upwardly revised 1.6% increase (from 1.4%) in March. Excluding food and energy, the index for final demand jumped 0.4% ( consensus 0.6%) following an upwardly revised 1.2% increase (from 1.0%) in March. There was a moderation in the year-over-year growth rates. The index for final demand was up 11.0%, versus 11.5% in March, and the index for final demand, excluding food and energy, was up 8.8%, versus 9.5% in March.
- The key takeaway from the report is that there was some moderation in the year-over-year changes, but even so, inflation rates for producers remain at intolerably high levels that will pressure profit margins if not passed along to customers.
- Initial jobless claims for the week ending May 7 increased by 1,000 to 203,000 (consensus 191,000). Continuing claims for the week ending April 30 decreased by 44,000 to 1.343 million. That is the lowest level since January 3, 1970.
- The key takeaway from the report is that jobless claims continue to run near historically low levels that are consistent with a tight labor market that can continue to create wage-based inflation pressures.
Looking ahead, investors will receive Import and Export Prices for April and the preliminary University of Michigan Index of Consumer Sentiment for May on Friday.
- Dow Jones Industrial Average -12.7 YTD
- S&P 500 -17.5% YTD
- Russell 2000 -22.5% YTD
- Nasdaq Composite -27.3% YTD