Closing Market Summary: Averages End Flat with Oil and Data in FocusThe stock market ended a quiet Thursday affair on a flat note as the S&P 500 (UNCH) bounced around a narrow seven-point range. Focal points for today's action included a modest downtick in oil, weakness in the dollar, and the underperformance of the heavyweight financial (-0.6%) and industrial (-0.2%) sectors. The Nasdaq Composite (+0.1%) finished ahead of the benchmark index (UNCH) and the Dow Jones Industrial Average (-0.1%).
The major averages began their day on a higher note, establishing a session high within the first 15 minutes of trade. However, equities moved lower in lockstep with oil as the energy component moved off its best level of the day. The broader market continued to see choppy action as the heavyweight financial sector (-0.6%) weighed.
Equities also saw pressure from positive readings of April Durable Goods Orders (+3.4%; consensus +0.6%) and weekly Initial Claims (268k; consensus 275k). The Durable Goods reading supports a view that there will be a pick-up in economic activity in the second quarter. This conforms to recent hawkish views expressed by members of the FOMC. Furthermore, the positive employment figure adds to the argument that labor data supports a hike.
The benchmark index ended its day flat with six sectors trading in the green. In front of the pack, countercyclical utilities (+1.1%) led telecom services (+0.5%) and consumer staples (+0.3%). On the flipside, materials (-1.1%), financials (-0.6%), and energy (-0.4%) underperformed. Additionally, WTI crude ended its day lower by 0.2% ($49.44/bbl) after briefly topping the $50.00/bbl price level.
Rate-sensitive utilities (+1.1%) and telecom services (+0.5%) rebounded as the Treasury complex experienced a healthy bid. The Treasury complex ended its day higher with the yield on the 10-yr note slipping four basis points to 1.83%. For the week, utilities and telecom services have gained a respective 0.9% and 1.0%, rounding out the weekly board.
In the technology space (+0.2%), HP (HPQ 13.04, +0.84) gained 6.9% after reporting a bottom-line beat and raising its full-year earning guidance above analysts' estimates. Alibaba (BABA 78.35, +2.76) jumped 3.7% as it rebounded from yesterday's news that the company is being investigated by the SEC for potential violations of securities law. Separately, the high-beta chipmakers outperformed, evidenced by the 0.3% gain in the PHLX Semiconductor Index.
Retail names ended on a mixed note as Costco (COST 149.71, +5.17), Dollar General (DG 88.01, +3.88), and Dollar Tree (DLTR 88.37, +10.01) each gained on positive quarterly reports. Conversely, Signet Jewelers (SIG 97.00, -11.37) tumbled 10.5% after the company missed same store sales figures.
The financial sector (-0.6%) fell prey to profit taking as money center banks and investment brokerages trimmed their recent gains. Citigroup (C 46.11, -0.83) fell 1.8%, but still shows an uptick of 2.7% on a weekly basis. This compares to a gain of 1.9% in the broader sector over that period.
The U.S. Dollar Index (95.16, -0.19) ended modestly lower as the euro and the yen finished with gains against the greenback. The euro/dollar pair finished higher by 0.3% (1.1191) while the dollar lost 0.4% against the yen (109.75).
Today's participation was below the recent average as fewer than 772 million shares changed hands on the NYSE floor.
Today's economic data included weekly initial claims, April Durable Goods Orders, and Pending Home Sales for April:
- Initial claims for the week ending May 21 were 268,000 (consensus 275,000), a decrease of 10,000 from the prior week.
- There were no special factors influencing initial claims. They held below 300,000 for the 64th consecutive week, which is the longest streak since 1973.
- The four-week moving average for initial claims increased by 2,750 to 278,500.
- Continuing claims for the week ending May 14 jumped by 10,000 to 2.163 million.
- The four-week moving average for continuing claims climbed by 8,500 to 2.151 million.
- Altogether the claims data remains in the Fed's favor when it comes to contemplating a rate hike at the June meeting.
- The Durable Goods Orders report for April was a real eye-opener. It indicated durable goods orders jumped 3.4% in April (consensus +0.6%).
- This followed an upwardly revised 1.9% increase in March (from +0.8%).
- Excluding transportation, orders were up 0.4% (consensus +0.5%) and were revised for March to show a 0.1% increase versus a previously reported 0.2% decline.
- In brief, the headline surprise from the report was certainly inspiring at first blush, yet there are still some bothersome trends below the surface that suggest the manufacturing sector isn't exactly operating in a high gear.
- The load in April was carried by transportation equipment, which saw an 8.9% jump in new orders led by a 64.9% increase in new orders for nondefense aircraft and parts.
- Capital goods orders, in turn, were up a robust 7.2% after a 7.5% increase in March.
- Machinery orders were a disappointment, declining 1.9% after declining 0.8% in March.
- The other disappointment was the drop in business spending, as reflected in the 0.8% decline in new orders for nondefense capital goods excluding aircraft.
- That followed on the heels of a 0.1% decline in March and a 2.1% decline in February.
- Shipments of nondefense capital goods excluding aircraft were up 0.3%, so that will be a positive input for Q2 GDP forecasts.
- Pending Home Sales for April climbed 5.1% while the consensus expected an uptick of 0.6%. Meanwhile, the March reading was revised to 1.6% from 1.4%.
Tomorrow's economic data will include the second estimate of Q1 GDP (consensus 0.9%) and the second estimate of the Q1 GDP Deflator (consensus 0.7%), which will both cross the wires at 8:30 ET. Capping off the week, the final reading of the May University of Michigan Sentiment Index (consensus 95.5) will cross the wires at 10:00 ET.
- Dow Jones +2.3% YTD
- S&P 500 +2.3% YTD
- Russell 2000 +0.4% YTD
- Nasdaq Composite -2.1% YTD