Closing Stock Market SummaryThe major indices closed mixed on Tuesday, as cyclical/value/small-cap stocks succumbed to profit-taking interest and growth/technology stocks showed relative outperformance. The S&P 500 shed 0.2% after starting the day at incremental new highs, but it struggled to attract follow-through from buyers ahead of the FOMC's policy statement tomorrow.
The Nasdaq Composite increased 0.1% after being up as much as 1.2% intraday. The Dow Jones Industrial Average declined 0.4% and snapped a seven-session winning streak. The Russell 2000 underperformed with a 1.7% decline.
Seven S&P 500 sectors closed lower while four closed higher. The cyclically-oriented energy (-2.8%), industrials (-1.4%), financials (-1.1%), consumer discretionary (-0.9%), and materials (-0.9%) sectors lagged throughout the day. The information technology (+0.8%) and communication services (+0.9%) sectors, however, provided influential support.
Prior to the open, investors received February retail sales and industrial production data that missed expectations, which in turn was construed as a good excuse to take profits in the cyclical stocks. Others ostensibly attributed the economic data to the early strength in the tech-sensitive Nasdaq, but truthfully, it was already indicated higher in pre-market action before the data was released.
Briefly, total retail sales declined 3.0% m/m decline in February following an upwards revision to 7.6% (from 5.3%) in January, and industrial production declined 2.2% m/m (Briefing.com consensus +0.5%). Note, there are expectations for retail sales to rebound in the coming months as households receive/spend their stimulus checks, while the industrial production data was influenced by the severe winter weather in southern parts of the U.S. last month.
Elsewhere, there was some focus on the Treasury market following a $24 billion 20-yr bond reopening action, which was met with strong demand. The 10-yr note yield briefly dipped to 1.59% in the wake of the auction results, then briefly rose to 1.63%, which took some steam out of the growth-stock trade.
The 10-yr yield ultimately settled one basis point higher at 1.62%. The 2-yr yield was unchanged at 0.14%. The U.S. Dollar Index was little changed at 91.87. WTI crude futures declined 0.9%, or $0.59, to $64.81/bbl.
Highlighting some individual stock news, Moderna (MRNA 156.02, +12.36, +8.6%) began dosing children ages 6 months to less than 12 years for its COVID-19 vaccine study, and Roblox (RBLX 77.00, +4.86, +6.7%) was initiated with a Buy rating at Stifel. MRNA and RBLX shares rose nearly 9% and 7%, respectively.
Reviewing Tuesday's economic data:
- Total retail sales declined 3.0% m/m in February (consensus -0.6%) and retail sales, excluding autos, declined 2.7% (consensus +0.2%). However, there were large upward revisions to January sales, with total sales increasing 7.6% (from 5.3%) and sales, excluding autos, surging 8.3% (from 5.9%).
- The key takeaway from the report is that the "weakness" in February was a byproduct of the tremendous strength in January, which made the sequential comparison exceedingly difficult. The market shouldn't be thrown for much of a loop by the February sales data -- if it's thrown for one at all -- because it recognizes that a new round of stimulus checks is just now starting to hit deposit accounts and will assuredly help prop up retail sales in March and April along with the early unleashing of some pent-up demand.
- Total industrial production decreased 2.2% m/m in February (consensus +0.5%) following an upwardly revised 1.1% increase (from 0.9%) in January. The capacity utilization rate dropped to 73.8% ( consensus 75.6%) from a downwardly revised 75.5% (from 75.6%) in January.
- The key takeaway from the report is that the decline was unduly influenced by the severe winter weather in the south central region of the country in mid-February. That should drive expectations for a quick, and sizable, rebound in March.
- The NAHB Housing Market Index decreased to 82 in March (consensus 84.0) from 84.0 in February.
- Business inventories increased 0.3% in January (consensus 0.3%) following a revised 0.8% increase (from 0.6%) in December.
- Import prices increased 1.3% in February while import prices excluding oil increased 0.4%. Export prices increased 1.6% in February while export prices excluding agriculture increased 1.5%.
Aside from the FOMC Rate Decision, investors will receive Housing Starts and Building Permits for February and the MBA Mortgage Applications Index on Wednesday.
- Russell 2000 +17.5% YTD
- Dow Jones Industrial Average +7.3% YTD
- S&P 500 +5.5% YTD
- Nasdaq Composite +4.5% YTD