Closing Market Summary: S&P 500 Ekes Out Third Win of the WeekOn Thursday, the House of Representatives passed the revised American Health Care Act, crude oil plunged 4.7% to $45.55/bbl, and Facebook's (FB 150.82, -0.98) upbeat earnings were overshadowed by a slowdown in ad revenue growth. However, the day's many headlines were met by a muted response from investors, who left the S&P 500 (+0.1%) just a tick above its unchanged mark. The Nasdaq (+0.1%) also finished with a slim gain while the Dow (unch) registered a small loss.
Without question, today's victory on the floor of the House was a big deal for the GOP, which has lacked a sense of cohesion since taking control of Congress and the Presidency earlier this year. However, the party still has an uphill battle to get its health care bill through the Senate, where it can only afford to lose two Republican votes. That looming uncertainty could delay action on other pro-growth promises like tax reform, and likely helped keep the bulls in check today.
Buyers in the equity market also struggled to overcome today's sell-off in the crude oil futures market, which left the energy component at its worst level in five months. The tumble was credited to a supply overhang following recent inventory reports, some weak data out of China, and the deteriorating technical picture for the commodity. Unsurprisingly, the energy sector (-1.9%) settled at the bottom of the day's leaderboard by a wide margin.
The lightly-weighted telecom services sector (-1.1%) also underperformed while the remaining laggard--consumer discretionary (-0.1%)--finished just short of its flat line. On the flip side, the consumer staples group (+0.8%) settled atop the sector standings with Kellogg (K 70.40, +1.46) adding 2.1% on better than expected earnings.
The health care sector (+0.6%) also finished ahead of the broader market thanks in part to the biotech industry, which rallied around Regeneron Pharmaceuticals' (REGN 434.31, +27.28) better than expected revenues. REGN shares jumped 6.7% while the iShares Nasdaq Biotechnology ETF (IBB 298.45, +2.11) increased by 0.7%. The financials (+0.2%), industrials (+0.1%), technology (unch), utilities (+0.4%), materials (+0.2%), and real estate (+0.1%) groups also closed in positive territory.
In the bond market, U.S. Treasuries settled lower across the board, steepening the yield curve along the way. The 10-yr yield (2.36%) increased four basis points while the 2-yr yield (1.31%) added only one. Meanwhile, gold ($1228.50/ozt) and silver ($16.29/ozt) settled solidly lower, losing 1.6% apiece, while the price of copper ($2.51/lb) declined by 1.2%.
On the data front, investors received a slew of economic reports on Thursday, including March Trade Balance, Initial Claims, March Factory Orders, and the preliminary reading of first quarter Productivity & Unit Labor Costs:
- The March trade balance showed a deficit of $43.7 billion while the consensus expected the deficit to hit $44.4 billion. The previous month's deficit was revised to $43.8 billion from $43.6 billion.
- The key takeaway from the report is that both exports and imports were down, led by decreases in economically-sensitive areas like industrial supplies, autos, and capital goods that spoke to the soft activity seen in the first quarter.
- The latest weekly initial jobless claims count totaled 238,000 while the consensus expected a reading of 246,000. Today's tally was below the unrevised prior week count of 257,000. As for continuing claims, they declined to 1.964 million from the revised count of 1.987 million (from 1.988 million).
- The key takeaway from the report is that it reflects a continued tightening in the labor market that will underpin expectations for a continuation of solid hiring activity.
- The Factory Orders Report for March showed an increase of 0.2% while the consensus expected an increase of 0.4%. The February reading was revised to 1.2% (from 1.0%).
- The key takeaway from the report is that overall business spending accelerated in March, evidenced by the 0.5% increase in nondefense capital goods orders excluding aircraft (the proxy for business spending), which came on top of an upwardly revised 0.1% increase (from -0.1%) in February.
- Unit labor costs increased 3.0% during the first quarter, which was higher than the 2.6% increase that had been anticipated by the consensus. The preliminary productivity reading showed an decrease of 0.6%. The consensus expected an increase of 0.1%.
- The key takeaway from the report is that productivity is weak, which is an important point since weak productivity gets in the way of a rising standard of living.
Tomorrow, investors will receive the Employment Situation Report for April (consensus 180,000) at 8:30 ET and March Consumer Credit (consensus $16.0 billion) at 15:00 ET.
- Nasdaq Composite +12.9% YTD
- S&P 500 +6.7% YTD
- Dow Jones Industrial Average +6.0% YTD
- Russell 2000 +2.3% YTD