Closing Market Summary: Influential Sectors Lead Stocks Lower
The stock market registered its second consecutive decline on Wednesday with the S&P 500 (-0.5%) bouncing off its 100-day moving average (2,070).
Equity indices began the day with slim gains, but the Dow, Nasdaq, and S&P 500 quickly returned below their 50-day moving averages and continued lower throughout the day. Adding to the pressure were comments from Fed Chair Janet Yellen who reminded investors that equity valuations are "generally quite high" and that raising the fed funds rate is likely to be followed by a spike in Treasury yields.
Today's opening spike notwithstanding, the session was largely a repeat of yesterday's slide; however, the Nasdaq, which underperformed on Tuesday, retreated alongside the broader market today. The key indices cut their losses in half during the final hour, but nine sectors settled in the red with the countercyclical telecom services space (-1.2%) ending behind its peers.
More notably, the largest sector by weight—technology (-0.8%)—was the second-weakest performer with large cap names fueling the weakness. Shares of Microsoft (MSFT 46.28, -1.32) tumbled 2.8% while the likes of Apple (AAPL 125.01, -0.79), Google (GOOGL 535.08, -7.96), Oracle (ORCL 43.26, -0.66), and Intel (INTC 32.22, -0.42) lost between 0.6% and 1.5%. It is worth noting that unlike Intel, some other chipmakers outperformed with the PHLX Semiconductor Index shedding just 0.1%.
Elsewhere, biotechnology represented another high-beta group that fared a bit better than the broader market. The iShares Nasdaq Biotechnology ETF (IBB 340.72, +2.72) added 0.8%, but that was a small victory considering the ETF was up more than 1.7% at the start. That being said, the relative strength of biotechnology could not stop the health care sector (-0.5%) from ending among the laggards.Similar to health care, two other countercyclical sectors—telecom services (-1.2%) and utilities (-throughout the day while the consumer staples sector (+0.2%) spent the day near its flat line.0.6%)—underperformed
Moving back to the cyclical side, only the materials sector (unch) finished near its flat line while the remaining growth-sensitive groups logged losses. For instance, the energy sector (-0.3%) spent the first half in the green, but slumped during the afternoon amid a pullback in oil. WTI crude was up more than 3.5% in the early going, but narrowed its gain to 0.8% at $60.93/bbl by the close.
Crude oil retreated even though today's storage report showed an inventory draw while an increase was expected. In addition, the energy component struggled even as the Dollar Index (94.13, -0.94) fell 1.0% to levels last seen in February.
Treasuries retreated through the morning and hovered near their lows during afternoon action. The benchmark 10-yr yield rose four basis points to 2.23%.
Today's participation was ahead of recent averages with more than 800 million shares changing hands at the NYSE floor.
Economic data included ADP Employment, Productivity/Unit Labor Cost data, and MBA Mortgage Index:Tomorrow, the April Challenger Job Cuts report will be released at 7:30 ET while weekly Initial Claims (consensus 280K) will be reported at 8:30 ET. The day's data will be topped off with the 15:00 ET release of the Consumer Credit report for March (consensus $16.00 billion).
- The ADP National Employment Report revealed that employment in the nonfarm private business sector rose by 169K in April while the consensus expected a reading of 189K
- The March reading was revised down to 175,000 from 189,000
- Nonfarm business productivity declined 1.9% in Q1 2015 after declining an upwardly revised 2.1% (from -2.2%) in Q4 2014 while the consensus expected a decline of 1.8%
- This was the first time nonfarm business productivity declined for two consecutive quarters since Q2 and Q3 of 2006. Even during the Great Recession, productivity managed to inch ahead on an upward trend
- Unit labor costs increased 5.0% in Q1 2015 after increasing 4.2% in Q4 2014
- That was the biggest increase in unit labor costs since an 11.5% increase in Q1 2014
- The weekly MBA Mortgage Index fell 4.6% to follow last week's 2.3% decline
- Nasdaq Composite +3.9% YTD
- Russell 2000 +1.3% YTD
- S&P 500 +1.0% YTD
- Dow Jones Industrial Average +0.1% YTD