Closing Market Summary: Stocks Slide Amid Disappointing Retail Earnings
The major averages ended the Tuesday in the red after surrendering their gains from Monday. In fact, the Russell 2000, which led the way on Monday, paced today's retreat after being unable to reclaim its 200-day moving average (1117/1118). The small cap index fell 1.5%, while the S&P 500 lost 0.7% with nine sectors ending in the red.
Equity indices began the day with modest losses amid general weakness in most cyclical sectors. Most notably, retailers pressured the discretionary sector (-0.9%) after Dick's Sporting Goods (DKS 43.60, -9.56), Staples (SPLS 11.71, -1.68), TJX (TJX 53.95, -4.45), and Urban Outfitters (URBN 32.98, -3.19) all reported disappointing earnings.
Similar to the four names, Home Depot (HD 77.96, +1.46) also reported below-consensus earnings, but the Dow component was able to stay out of the red as upbeat comments from the management overshadowed the earnings miss. Despite Home Depot's outperformance, the retail space struggled with the SPDR S&P Retail ETF (XRT 81.83, -2.07) falling 2.5%.
Elsewhere among influential sectors, financials (-0.7%) and industrials (-1.3%) lagged, while technology (-0.5%) and health care (-0.6%) outperformed.
Notably, the second-weakest sector of the month—financials—extended its May loss to 1.3%. In all fairness, the economically-sensitive group has been unable to gain any traction since the start of the year as today's loss widened its year-to-date decline to 0.9%.
Also of note, the health care sector was able to keep pace with the S&P 500 even as biotechnology struggled. The iShares Nasdaq Biotechnology ETF (IBB 228.36, -3.14) lost 1.4%, which contributed to the underperformance of the Nasdaq.
All in all, today's early price action was relatively sloppy, which opened the door to a more pronounced retreat in the afternoon. In addition, the overall sense of caution was heightened by continued yen strength as the dollar/yen pair registered its fifth consecutive decline while testing its 200-day moving average (101.19).
In all likelihood, some will attribute today's retreat to comments from Philadelphia Fed President Charles Plosser, who said he felt the economy is on its firmest footing since the recovery began. However, it is worth noting that equities began sliding ahead of Mr. Plosser's comments and that longer-dated Treasuries actually climbed to highs following the remarks. The 10-yr note advanced nine ticks, pressuring its yield four basis points to 2.51%.
Today's participation marked an improvement from yesterday, but remained below average with less than 650 million shares changing hands at the NYSE.
Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET, while the minutes from the latest FOMC policy meeting will be released at 14:00 ET.
* S&P 500 +1.3% YTD * Dow Jones Industrial Average -1.2% YTD * Nasdaq Composite -1.9% YTD * Russell 2000 -5.5% YTD