Closing Market Summary: December Begins on Cautious Note
Equity indices finished the first December session on a lower note as the S&P 500 shed 0.3%. Small caps endured steady selling throughout the session as the Russell 2000 fell 1.2%.
The benchmark index spent some time on each side of its flat line, but ultimately ended near its lows. The index attempted to build on the relative strength of financials (-0.2%) and materials (-0.2%), but the underperformance of technology (-0.3%), industrials (-0.5%) and discretionary shares (-0.5%) short-circuited the rally. The discretionary sector was pressured by homebuilders and retailers. The iShares Dow Jones US Home Construction ETF (ITB 22.69, -0.45) lost 1.9% as Treasury yields climbed throughout the session. The benchmark 10-yr yield added five basis points to 2.80%. Meanwhile, retailers slumped after the National Retail Federation said Thanksgiving weekend sales were down 3.0% year-over-year. The SPDR S&P Retail ETF (XRT 87.87, -0.59) lost 0.7%. However, eBay (EBAY 51.35, +0.83) outperformed its brick-and-mortar peers amid indications holiday online sales have gotten off to a strong start. Elsewhere, Dow component 3M (MMM 127.68, -5.83) pressured the industrial sector, falling 4.4% after Morgan Stanley downgraded the stock to ‘Underweight.' Transports withstood the bulk of the selling as the Dow Jones Transportation Average added 0.3%. The Nasdaq also contributed to the afternoon weakness as top-weighted components and momentum names lagged. Apple (AAPL 551.23, -4.84), Google (GOOG 1054.48, -5.11), and Intel (INTC 23.70, -0.14) lost between 0.5% and 0.9% while LinkedIn (LNKD 220.39, -3.64) and Tesla (TSLA 124.17, -3.11) fell 1.6% and 2.4%, respectively. A pocket of strength could be found inside the tech-heavy index as biotechnology outperformed. The iShares Nasdaq Biotechnology ETF (IBB 224.73, +0.57) added 0.3%, which helped the health care sector finish with a slim gain of 0.1%. The remaining countercyclical groups lagged across the board as consumer staples, telecom services and utilities lost between 0.4% and 0.9%.
Today's participation was well below average as 667 million shares changed hands on the floor of the New York Stock Exchange. Investors received just two economic data points today. After increasing a downwardly revised 0.1% (from 0.6%) in August, construction spending fell 0.3% in September before rebounding and increasing a solid 0.8% in October. The consensus expected construction spending to increase 0.4% and 0.3% in September and October, respectively. The big gain in October spending came entirely from the government sector. Spending rose 3.9% in October, namely from an 8.5% gain in educational and a 5.9% gain in transportation. Private construction spending fell 0.5% in October after increasing 0.4% in September. Separately, the November ISM Manufacturing Index increased to 57.3 from 56.4.That was the highest reading since the index reached 59.4 in April 2011. The consensus expected the index to fall to 55.5. For the past several months, regional manufacturing surveys have hinted at a slowdown in manufacturing activities, but the national ISM has shrugged those off and continued its trek higher. There is no notable economic data on tomorrow's schedule.
o Nasdaq +34.0% YTD o Russell 2000 +32.9% YTD o S&P 500 +26.3% YTD o DJIA +22.2% YTD