Closing Stock Market SummaryThere was not a lot of conviction behind today's trade as investors digested day two of Fed Chair Powell's testimony before the House Financial Services Committee. The main indices spent the majority of the session trading either slightly above or slightly below their flat lines.
The lackluster price action today was due to the Treasury market signaling concerns about the Fed possibly taking rates too high and forcing a recession. Yesterday's settlement levels brought the 2s10s spread to its widest margin since 1981 and things didn't get any better today.
The 2-yr note yield rose five basis points to 5.06% and the 10-yr note yield settled unchanged at 3.98%. This followed a slate of better than expected data this morning and a $32 billion 10-yr note reopening, which did not go over so well at auction. The high yield of 3.985% at that auction tailed the when-issued yield of 3.958% by nearly three basis points on relatively weak dollar demand. The bid-to-cover ratio was 2.35 versus the prior 12-auction average of 2.43.
Following the auction at 1:00 p.m. ET, the 10-yr note yield moved up to challenge the 4.00% level again. With that move, stock prices deteriorated and the major indices slipped to trade closer to their lows of the session.
The main indices were able to close comfortably above their lows, though, thanks to a mega-cap driven rally effort taking root in the last hour of trading. The upside momentum eventually petered out when the S&P 500 almost hit its 50-day moving average (3,997), which pivoted Tuesday from support to resistance.
With the late afternoon push higher, most of the S&P 500 sectors registered a gain today. Moves were somewhat modest in scope with the exception of real estate (+1.3%), information technology (+0.8%), and utilities (+0.8%). The energy sector (-1.0%), meanwhile, logged the biggest decline.
Market participants also received the Fed's Beige Book, released at 2:00 p.m. ET, that indicated overall economic activity increased slightly in early 2023. The reaction to the Fed's Beige Book, along with today's better than expected economic data (the February ADP Employment Change, the January Trade Balance, and the January JOLTS - Job Openings), was relatively muted.
- Nasdaq Composite: +10.6% YTD
- Russell 2000: +6.7% YTD
- S&P Midcap 400: +6.4% YTD
- S&P 500: +4.0% YTD
- Dow Jones Industrial Average: -1.0% YTD
Reviewing today's economic data:
- The weekly MBA Mortgage Application Index rose 7.4% with refinancing applications increasing 9.0% and purchase applications rising 7.0%.
- The ADP Employment Change showed that private payrolls rose by 242,000 in February ( consensus 195,000) following a revised 119,000 increase in January (from 106,000).
- The trade deficit for January widened to $68.3 billion ( consensus -$69.0 billion) from an upwardly revised $67.2 billion (from -$67.4 billion), as imports were $9.6 billion more than December imports and exports were $8.5 billion more than December exports.
- The key takeaway from the report is that both imports and exports increased versus December, reflecting a pickup in global trade activity that is a reflection of increased demand.
- JOLTS - Job Openings totaled 10.824 million in January following a revised 11.234 million in December (from 11.012 million).
- Weekly EIA Crude Oil Inventories showed a draw of 1.69 million barrels following last week's build of 1.17 million barrels.
Looking ahead to Thursday, market participants will receive the following economic data:
- 8:30 ET: Weekly Initial Claims ( consensus 198,000; prior 190,000) and Continuing Claims (prior 1.655 mln)
- 10:30 ET: Weekly natural gas inventories (prior -81 bcf)