Closing Market Summary: Slight volatility ahead of the long weekendThe major indices saw a bit of volatility ahead of the long weekend, opening firmly higher before giving way to selling pressure. All the indices set session lows in early trade, climbed as the day went on, but backpedaled from highs into the close. Bargain hunting activity helped keep the S&P 500 in positive territory as the market was oversold on a short-term basis coming into today.
The market saw high volume on this quadruple witching options expiration day which left the S&P 500 up 0.2% for the day and down 5.8% for the week; the Nasdaq up 1.4% for the day and down 4.8% for the week; and the Dow Jones Industrial Average down 0.1% for the day and down 4.8% for the week.
The energy complex selling off today, no doubt, helped buying sentiment. WTI crude oil futures fell 6.3% to $108.06/bbl, natural gas futures settled down nearly 7% to $6.95/mmbtu, and Unleaded gasoline futures fell 4.2% to $3.68/gal. In addition, the energy sector was the worst performing S&P 500 sector by a wide margin, down 5.6% at the close.
The modest gains today were not enough to claw back out of the red for the week. The losses experienced earlier this week were attributed to economic growth concerns, which have been an offshoot of aggressive rate-hike actions from many of the world's leading central banks racing to combat inflation.
The Bank of Japan, however, isn't even in the race. Today, it agreed to leave its key policy rate unchanged at -0.1% and to maintain yield curve control with an aim of keeping the 10-yr JGB yield at around zero percent. The yen sank on this news, falling 2.1% against the dollar to 134.99.
A stronger dollar is doing nothing to help U.S. multinational companies like Adobe (ADBE 360.79, -4.29, -1.2%) which reported better-than-expected earnings before the open but lowered Q3 guidance below consensus citing foreign exchange headwinds and Russia's war on Ukraine as contributing factors. Adobe reached a new 52-week low today.
Six of the 11 S&P 500 sectors closed in the green to end the week. The heavily weighted communication services (+1.3%), consumer discretionary (+1.2%), and information technology (+1.0%) sectors finished atop today's leaderboard.
The discretionary sector played a significant part in keeping the S&P 500 in positive territory even though several of its components hit fresh 52-week lows before bouncing. Travel-related names were at the forefront of the advance with Carnival (CCL 9.60, +0.85, +9.7%) leading the way, as it bounced after approaching its pandemic low in recent days. Top-weighted Amazon (AMZN 106.22, +2.56, +2.5%) held above its May low (101.26), contributing to the strength in the sector.
The laggards, besides energy, were utilities (-1.0%), consumer staples (-0.4%), and industrials (-0.2%).
Treasuries finished a down week on a mostly higher note with the 10-yr yield falling seven basis points to 3.24%. The 2-yr note underperformed, pressuring the spread between the 10-yr yield and the 2-yr yield to just six basis points.
Reviewing today's data:
- Total industrial production increased 0.2% month-over-month in May ( consensus 0.5%) following an upwardly revised 1.4% increase (from 1.1%) in April. The capacity utilization rate increased to 79.0% ( consensus 79.3%) from a downwardly revised 78.9% (from 79.0%) in April.
- The key takeaway from the report is the dip in manufacturing output. That dip, however, followed three months where growth averaged nearly 1.0%, so it is too soon to say if the dip in May is a sign of true weakness or a natural moderation following an extended period of solid growth.
- The Leading Economic Index for May was down 0.4% after decreasing a revised 0.4% (from -0.3%) in April.
Bond and equity markets will be closed on Monday for Juneteenth while Tuesday's economic data will be limited to the 10:00 ET release of May Existing Home Sales (prior 5.61 mln).
· Dow Jones Industrial Average -17.8% YTD
· S&P 400 -21.8% YTD
· S&P 500 -22.9% YTD
· Russell 2000 -25.8% YTD
· Nasdaq Composite -31.0% YTD