Closing Market Summary: Small Caps Lead Stocks Lower
The stock market began the first full week of July on a cautious note with small caps pacing the retreat. The Russell 2000 and Nasdaq Composite posted respective losses of 1.7% and 0.8%, while the S&P 500 fell 0.4% with seven sectors ending in the red.
Equities spent the duration of the trading day in negative territory with the opening weakness taking place amid cautious action in Europe. A disappointing Industrial Production report from Germany (-1.8% versus expected 0.2%) weighed on sentiment, which contributed to the profit-taking.
Back in the U.S., profit-taking was also the theme of the day with some of the recent leaders seeing larger losses than the broader market. Specifically, the Nasdaq and Russell 2000 led the slide after entering the session with respective gains of 9.9% and 6.3% over the last three months.
The tech-heavy Nasdaq underperformed even as its top-weighted component—Apple (AAPL 95.97, +1.94)—rallied throughout the session. Chipmakers, however, pressured the index with the PHLX Semiconductor Index falling 0.7%. Similarly, biotechnology proved to be a drag on the index as the iShares Nasdaq Biotechnology ETF (IBB 259.09, -6.93) lost 2.6%.
In turn, the relative weakness of the biotech space pressured the health care sector (-0.8%), while the remaining countercyclical groups fared a bit better than the broader market. Telecom services (+0.3%) and utilities (+0.4%) held gains throughout the session, while the consumer staples sector (+0.1%) climbed out of the red during the afternoon.
Meanwhile, just about every cyclical sector struggled to keep pace with the market. The technology sector (unch) was the lone outperformer, while the other five registered losses between 0.5% and 0.8%.
Notably, the industrial sector (-0.7%) was pressured by widespread losses among transportation stocks. Airlines like Delta Air Lines (DAL 36.90, -1.70) and United Continental (UAL 38.62, -1.26) registered respective losses of 4.4% and 3.2%, while the Dow Jones Transportation Average (-1.0%) surrendered its July gain.
With stocks ending on their lows, participants did show some increased demand for volatility protection, which sent the CBOE Volatility Index (VIX 11.43, +1.11) from seven-year lows into the middle of its range from June.
Treasuries saw overnight losses, but a daylong rally resulted in the 10-yr note adding five ticks to send its yield lower by two basis points to 2.61%.
Participation was well below average with less than 600 million shares changing hands at the NYSE.
Tomorrow, the Job Openings and Labor Turnover Survey will be released at 10:00 ET, while the May Consumer Credit report will cross the wires at 15:00 ET (consensus $16.20 billion).
* S&P 500 +7.0% YTD * Nasdaq Composite +6.6% YTD * Dow Jones Industrial Average +2.7% YTD * Russell 2000 +2.1% YTD