Closing Market SummaryThe stock market ended Wednesday on a weak note with the major averages finishing near yesterday's lows. The S&P 500 lost 0.8% while the Russell 2000 (-0.5%) finished a bit ahead despite lagging in morning trade.
Early action saw a continuation of yesterday's selling with some recent top performers fueling the retreat. The financials sector (-1.7%) underperformed throughout the day after rallying off a 13-month low at the end of May. Today, the sector was pressured by comments from JPMorgan Chase (JPM 129.91, -2.32, -1.8%) CEO Dimon, who warned about an approaching "economic hurricane." Shares of JPM surrendered yesterday's gain but finished above their low after bouncing off their 50-day moving average (128.34).
The broader market enjoyed an afternoon recovery that returned the S&P 500 to its unchanged level, but renewed selling pressure appeared in the afternoon.
Elsewhere among cyclical sectors, industrials (-0.6%) and the consumer discretionary space (-0.8%) finished near the S&P 500 while the technology sector (-0.3%) ended just below its flat line after reclaiming a chunk of its opening loss. The sector owed its outperformance to relative strength in top components Apple (AAPL 148.71, -0.13, -0.1%) and Microsoft (MSFT 272.42, +0.55, +0.2%), but they too faced some late pressure. Salesforce (CRM 176.07, +15.83, +9.9%) and HP (HPQ 40.34, +1.50, +3.9%) represented pockets of relative strength throughout the day after both companies reported better than expected quarterly results. Chipmakers failed to keep pace with the sector, sending the PHLX Semiconductor Index lower by 1.6%.
Health care (-1.4%) and consumer staples (-1.3%) finished near the bottom of the leaderboard due to broad-based losses. Archer-Daniels (ADM 86.67, -4.15, -4.6%) was the worst performer among staple stocks, falling from its best level in nearly four weeks back below its 50-day moving average (90.25).
On the upside, energy (+1.8%) spent the day in the green, building on its gain as the session went on. The sector's continued strength was supported by another uptick in crude oil, which climbed $0.40, or 0.4% to $115.33/bbl. Baker Hughes (BKR 37.41, +1.43, +4.0%) was the top performer in the sector, reclaiming yesterday's entire loss.
Treasuries added to their losses from yesterday with shorter tenors leading the retreat. The 2-yr yield rose 11 bps to 2.65% while the 10-yr yield rose nine basis points to 2.93%.
The Fed released its Beige Book for June, which noted that all Districts reported continued growth with most reporting slight or modest growth while four reported a slowdown. There was some softening in the retail sector and residential real estate due to high prices and high interest rates. Employment expanded modestly or moderately while one District saw a slowdown. Prices continued rising at a strong or robust pace with manufacturers maintaining the bulk of their pricing power.
Reviewing today's economic data:
- The May ISM Manufacturing Index increased to 56.1% ( consensus 54.9%) from 55.4% in April. A number above 50.0% is indicative of expansion. May marked the 24th consecutive month of expansion in the manufacturing sector, although the May reading was the second lowest since September 2020.
- The key takeaway from the report is that manufacturing activity picked up in May despite ongoing supply chain problems and pricing pressures. Still, sentiment regarding demand remained strongly optimistic.
- Total construction spending increased 0.2% month-over-month in April (consensus 0.6%) following an upwardly revised 0.3% increase (from 0.1%) in March. Total private construction increased 0.5% month-over-month while total public construction decreased 0.7%. On a year-over-year basis, total construction spending was up 12.3%.
- The key takeaway from the report is that, other than residential spending, there wasn't much strength in spending activity in either the private or public sectors.
- Job openings decreased to 11.400 mln in April from a revised 11.855 mln (from 11.549 mln) in March.
- The IHS Markit Manufacturing PMI fell to 57.0 in the final reading for May from 57.5 in the preliminary reading.
- The weekly MBA Mortgage Index fell 2.3% after falling 1.2% during the previous week.
The ADP Employment Change for May (Briefing.com consensus 295,000; prior 247,000) will be reported tomorrow at 8:15 ET, followed by weekly Initial Claims (consensus 210,000; prior 210,000), Continuing Claims (prior 1.346 mln), revised Q1 Productivity (Briefing.com consensus -7.5%; prior -7.5%), and revised Q1 Unit Labor Costs ( consensus 11.6%; prior 11.6%) at 8:30 ET, and April Factory Orders (Briefing.com consensus 0.7%; prior 2.2%) at 10:00 ET.
- Dow Jones Industrial Average -9.7% YTD
- S&P 400 -12.1% YTD
- S&P 500 -14.0% YTD
- Russell 2000 -17.4% YTD
- Nasdaq Composite -23.3% YTD