Closing Stock Market SummaryThe stock market had a mixed showing today. Index level performance was supported by strong mega cap stocks, which were benefitting from some flight to safety trading as concerns about global growth rose to the fore. The broader market, though, exhibited weakness due to continued consolidation efforts and the aforementioned growth concerns.
Apple (AAPL 187.00, +3.04, +1.7%), which hit a new 52-week high today on no news, Amazon.com (AMZN 130.15, +5.32, +4.3%), which logged a sizable gain after AWS announced a $100 million investment in a new generative AI program, and Alphabet (GOOG 123.87, +2.61, +2.2%) were some of the top performers from the mega cap space. The Vanguard Mega Cap Growth ETF (MGK) rose 1.1%.
The major indices all settled near their best levels of the session, leaving the S&P 500 and Nasdaq with gains while the Dow Jones Industrial Average closed flattish.
The Invesco S&P 500 Equal Weight ETF (RSP), however, declined 0.4%. Market breadth also reflected more negative action under the surface. Decliners lead advancers by a nearly 2-to-1 margin at the NYSE and a greater than 3-to-2 margin at the Nasdaq.
The underlying weakness was in response to a slate of rate hikes by the Bank of England (+50 bps to 5.00%), Norges Bank (+50 bps to 3.75%), Swiss National Bank (+25 bps to 1.75%), and Central Bank of Turkey (+650 bps to 15.0%). Those moves stoked concerns about global inflation and the lag effects of rate hikes potentially impacting global growth.
In addition, Fed Governor Michelle Bowman (FOMC voter) said in a speech that "additional policy rate increases will be necessary to bring inflation down." This followed Fed Chair Powell's commentary yesterday indicating that there could be two more rate hikes by the Fed before the end of the year if the economy performs as expected.
This morning's economic data, though, was mostly weaker than expected. Existing home sales declined 20.4% year-over-year in May while the Leading Economic Index declined for the 14th consecutive month.
Fed Chair Powell continued his monetary policy testimony before the Senate Banking Committee today. He didn't provide any new surprises in terms of monetary policy views, yet there was consternation among committee members regarding capital requirements for banks. That understanding, coupled with the growth concerns, undercut the bank stocks. The SPDR S&P Bank ETF (KBE) fell 3.2% and the SPDR S&P Regional Banking ETF (KRE) fell 2.7%.
Weak regional bank components, along with weak energy shares, drove the Russell 2000 to underperform today, declining 0.8%.
Most of the S&P 500 sectors registered a loss. Real estate (-1.4%) and energy (-1.3%) saw the largest declines, although the cyclical financial (-0.7%), industrials (-0.7%), and materials (-0.3%) sectors underperformed. Meanwhile, strong mega cap components drove the consumer discretionary (+1.5%), communication services (+1.2%), and information technology (+0.9%) sectors to the top of the leaderboard.
Treasuries settled with losses across the curve. The 2-yr note yield rose nine basis points to 4.80% and the 10-yr note yield rose eight basis points to 3.80% in response to the aforementioned rate hikes.
- Nasdaq Composite: +30.2% YTD
- S&P 500: +14.1% YTD
- Russell 2000: +4.9% YTD
- S&P Midcap 400: +4.7% YTD
- Dow Jones Industrial Average: +2.4% YTD
Reviewing today's economic data:
- Q1 Current Account Balance -$219.3 bln; Prior was revised to -$216.2 bln from -$206.8 bln
- Initial jobless claims for the week ending June 17 were unchanged at 264,000 and the four-week moving average of 255,750 was the highest since November 13, 2021. Continuing jobless claims for the week ending June 10 decreased by 13,000 to 1.759 million.
- The key takeaway from the report is that initial jobless claims have remained elevated (third straight week above 260,000), suggesting that there is some loosening in the labor market, although the level of initial claims remains well below average levels north of 375,000 seen in all recessions since 1980.
- Existing home sales increased 0.2% month-over-month in May to a seasonally adjusted annual rate of 4.30 million ( consensus 4.28 million) from an upwardly revised 4.29 million (from 4.28 million) in April. Sales were down 20.4% from the same period a year ago.
- The key takeaway from the report is that the inventory of existing homes for sale remains tight, which is due in part to the strength of the labor market, the ability to work remotely, and the jump in mortgage rates that is deterring existing home owners' interest in moving.
- Leading Indicators fell 0.7% in May ( consensus -0.8%) following a prior decline of 0.6%.
- The weekly EIA Natural Gas Inventories showed a build of 95 bcf versus a build of 84 bcf last week.
- The weekly EIA Crude Oil Inventories showed a draw of 3.83 million barrels after last week's build of 7.92 million barrels.
Looking ahead to Friday, economic data is limited to the preliminary IHS Markit Manufacturing PMI (prior 48.4) and Services PMI (prior 54.9) for June at 9:45 a.m. ET.