Closing Stock Market SummaryThe stock market started today's session with a distinct bullish bias, yet the bulls were soon corralled and the major indices spent nearly the entirety of today's session retracing their opening steps in what became a trend-down day. The selling that took place was broad based, but orderly; nonetheless, it left the S&P 500 below 4,100 at the closing bell.
A favorable response to Walt Disney's (DIS 110.36, -1.42, -1.3%) better-than-expected fiscal Q1 earnings report and restructuring announcement, falling Treasury yields, and another weekly initial jobless claims report that was supportive of the soft landing scenario provided the fuel for the opening bid.
To be fair, Disney wasn't the only source of earnings support for the broader market to begin the day. Wynn Resorts (WYNN 108.59, +4.97, +4.8%), Monolithic Power Systems (MPWR 510.43, +47.43, +10.2%), Sonos (SONO 20.80, +2.94, +16.5%), PepsiCo (PEP 172.78, +1.62, +1.0%), and Tapestry (TPR 44.71, +1.50, +3.5%) were some of the other standouts that had the broader market on solid footing at today's open. Disney itself followed suit with the broader market and relinquished a 5.7% gain to close the day in negative territory.
The market's footing started to slide when Treasury yields began moving up from their overnight lows. Selling in the Treasury market intensified following a weak, $21 billion 30-yr bond auction at 1:00 p.m. ET. The 2-yr note yield, which slipped to 4.40% overnight, settled the day at 4.52%, and the 10-yr note yield, which saw 3.58% overnight, settled the session at 3.69%.
The jump in market rates compounded the selling pressure that had already taken root.
Separately, the early rally effort also fostered some pressing concerns about the market being overextended on a short-term basis and trading at a premium valuation despite declining earnings estimates.
Those concerns triggered renewed selling interest that was fairly unrelenting over the course of today's session.
The S&P 500 communication services sector (-2.8%) was today's biggest loser, pinned down by additional losses in Alphabet (GOOG 95.46, -4.54, -4.5%), but it had plenty of company. All 11 S&P 500 sectors ended the day with a loss. Other key laggards included the financials (-1.2%), industrial (-0.9%), health care (-0.9%), and information technology (-0.5%) sectors. The consumer discretionary sector (-0.2%), supported by strength in Tesla (TSLA 207.32, +6.03, +3.0%) and several sector constituents that reported earnings, like Wynn Resorts, had the slimmest loss in today's trading.
Market breadth deteriorated along with the indices. Declining stocks led advancing stocks by a nearly 3-to-1 margin at the NYSE and by a better than 2-to-1 margin at the Nasdaq.
- Nasdaq Composite: +12.6% YTD
- Russell 2000: +8.7% YTD
- S&P Midcap 400: +8.3% YTD
- S&P 500: +6.3% YTD
- Dow Jones Industrial Average: +1.7% YTD
Reviewing today's economic data:
- Initial claims for the week ending February 4 increased by 13,000 to 196,000 (consensus 194,000). Continuing jobless claims for the week ending increased by 38,000 to 1.688 million.
- Notwithstanding the jump in initial claims, the key takeaway is that claims remain below 200,000, which is indicative of a very tight labor market and a reluctance on the part of most companies to cut their workforce.
Ahead of tomorrow's open, Global Payments (GPN) and Newell Brands (NWL) will be featured earnings reporters. The economic calendar will include the February Preliminary University of Michigan Consumer Sentiment Index (Briefing.com consensus 65.0; Prior 64.9) at 10:00 a.m. ET and the January Treasury Budget (Prior -$85.0B) at 2:00 p.m. ET.