Closing Stock Market SummaryToday's session started on a weaker note as market participants digested the hotter-than-expected Producer Price Index (PPI) for November. For most of the session the main indices clung to narrow trading ranges near their flat lines with both buyers and sellers lacking conviction. Things deteriorated noticeably, however, with about 30 minutes left in the session when the S&P 500 cracked an intraday support zone in the 3955 area. The selling pinned the indices deeper in negative territory and left them at their lows for the day when the closing bell rang.
The PPI report kept market participants on edge ahead of next week's Consumer Price Index and FOMC meeting, the latter of which will also include an updated Summary of Economic Projections that will provide some insight on terminal rate projections.
On a month-over-month basis, the PPI and core-PPI readings were higher than expectations, but the year-over-year readings (7.4% for total PPI and 6.2% for core PPI) were down from 8.1% and 6.8%, respectively, in October.
Still, the stock market's reaction was relatively subdued with the three main indices falling less than 1.0% today.
Longer-dated Treasuries had a more noticeable reaction. The 10-yr note yield rose eight basis points today to 3.57%. The 2-yr note yield, meanwhile, rose by two basis points to 4.34%.
The late afternoon sell off, which had the semblance of a sell program, left ten of the 11 S&P 500 sectors in negative territory. Energy (-2.3%) was the top laggard despite oil prices squeezing out a slim gain this session ($71.46/bbl, +0.06, +0.1%).
On the flip side, the communication services sector (+0.02%) was the lone holdout in positive territory. A nice gain in Netflix (NFLX 320.01, +9.75, +3.1%) bolstered sector performance after the company received an upgrade to Overweight from Equal Weight at Wells Fargo.
Despite the noticeable decline ahead of the close, most of today's outsized moves were reserved for individual stocks like lululemon (LULU 326.39, -48.12, -12.9%) and DocuSign (DOCU 49.16, +5.41, +12.4%), which reacted in different ways to their latest earnings reports and outlooks.
- Dow Jones Industrial Average: -7.9% YTD
- S&P Midcap 400: -13.1% YTD
- Russell 2000: -20.0% YTD
- S&P 500: -17.5% YTD
- Nasdaq Composite: -29.7% YTD
Reviewing today's economic data:
- The Producer Price Index for final demand increased 0.3% month-over-month in November (consensus +0.2%) following an upwardly revised 0.3% increase (from 0.2%) in October. The index for final demand, less foods and energy, increased 0.4% month-over-month ( consensus +0.2%) following an upwardly revised 0.1% increase (from 0.0%) in October.
- On a year-over-year basis, the index for final demand was up 7.4%, versus 8.1% in October, and the index for final demand, less foods and energy, was up 6.2%, versus 6.8% in October.
- The key takeaway from the report is that it will pique concerns about next week's Consumer Price Index not being as friendly as expected either, which in turn will keep the market on edge about the Fed's monetary policy path. Beyond that consideration, it is good nonetheless to see the year-over-year change in PPI and core PPI moving lower, although the current levels are still far too high.
- Wholesale Inventories fell to 0.5% in October from a revised 0.8% in September (from 0.6%).
- The preliminary December University of Michigan Index of Consumer Sentiment checked in at 59.1 ( consensus 57.0) versus the final reading of 56.8 for November. In the same period a year ago, the index stood at 70.6.
- The key takeaway from the report is that sentiment improved in conjunction with rising stock prices and falling gas prices. Notably, inflation expectations also improved with the downturn in gas prices.
Looking ahead to Monday, market participants will receive the following economic data:
- 9:45 a.m. ET: Final IHS Markit Services PMI reading for November (prior 46.1)
- 10:00 a.m. ET: October Factory Orders ( consensus 0.7%; prior 0.3%)
- 10:00 a.m. ET: November ISM Non-Manufacturing Index (consensus 53.5%; prior 54.4%)