Closing Stock Market Summary
Today was the first trading day of the new month and second calendar day of the fourth quarter. Stocks followed a familiar pattern, though, and struggled alongside rising market rates. The final standing for the S&P 500 was a bit misleading, as it belied broad weakness below the surface.
The Invesco S&P 500 Equal Weight ETF (RSP) fell 1.1% and nine of the 11 S&P 500 sectors saw a decline. The rate-sensitive utilities sector was noticeably weak, plunging 4.7%. The energy sector (-2.1%) was another laggard, sliding with oil prices ($89.71/bbl, -1.10, -1.2%), which was partially a reaction to a stronger dollar and a Reuters report that OPEC's oil output rose in September.
Relative strength in the mega cap space proved to the be the difference for the market-cap weighted S&P 500 and Nasdaq Composite. The Dow Jones Industrial Average and the Russell 2000, meanwhile, registered losses of 0.2% and 1.6%, respectively.
Following a big move in September, the 10-yr note yield jumped another 11 basis points to 4.68% after hitting 4.70% earlier. The 2-yr note yield settled seven basis points higher at 5.11%. Those moves occurred in the midst of a better-than-expected ISM Manufacturing Index for September and some pleasing construction spending data for August, although yields were rising in front of those 10:00 a.m. ET releases.
The S&P 500 tested the 4,300 level at its high this morning, but failed to break above it. That failure, along with the 10-yr note yield hitting 4.70% at its high of the day, invited additional selling activity.
Mega cap stocks took on a safe-haven visage that mitigated broad market losses. They were not immune to selling activity, but saw an uptick in buying in the late afternoon that enabled the three major indices to close off their lows. NVIDIA (NVDA 447.82, +12.83, +3.0%), Apple (AAPL 173.75, +2.54, +1.5%), and Microsoft (MSFT 321.80, +1.38, +1.9%), which were relative strength leaders throughout the session, were standouts in that regard. The Vanguard Mega Cap Growth ETF (MGK) closed up 1.0%.
The communication services (+1.5%), information technology (+1.3%), and consumer discretionary (+0.3%) sectors, all of which house mega-cap components, were alone in positive territory at the close.
- Nasdaq Composite: +27.2% YTD
- S&P 500: +11.7% YTD
- S&P Midcap 400: +1.6% YTD
- Dow Jones Industrial Average: +0.9% YTD
- Russell 2000: -0.3% YTD
Reviewing today's economic data:
- The September ISM Manufacturing PMI checked in at 49.0% (consensus 47.8%), up from 47.6% in August. The dividing line between expansion and contraction is 50.0%, so the September reading denotes an ongoing contraction in the manufacturing sector, but at a slower pace than the prior month. September marked the 11th straight month the PMI reading has been below 50.0%.
- The key takeaway from the report is the understanding that the pace of contraction in the manufacturing sector slowed in September, which is something that will be construed as an economy tracking more for a soft landing at this juncture than a hard landing.
- Total construction spending increased 0.5% month-over-month in August ( consensus 0.5%) after increasing an upwardly revised 0.9% (from 0.7%) in July. Total private construction was up 0.5% month-over-month while total public construction increased 0.6% month-over-month. On a year-over-year basis, total construction spending was up 7.4%.
- The key takeaway from the report is that there was balanced strength in August between private and public construction spending that gave a boost to total construction spending, which was up nicely year-over-year, leaving it well out of any hard-landing zone.
Tuesday's economic data is limited to the August JOLTS - Job Openings report at 10:00 a.m. ET.