Closing Stock Market SummaryThe stock market had growth concerns on its mind when it started today's session. When it ended today's session, it was wrapped up more in a feeling of inflation relief. Still, it was impossible to put a bow on that package, because the inflation relief was borne out of an expectation that global economic growth is going to weaken appreciably.
Nevertheless, things looked a lot better at the close than they did shortly after the open. At their lows of the morning, the Dow, Nasdaq, and S&P 500 were down 2.4%, 1.9%, and 2.2%, respectively. The Nasdaq would ultimately close up 1.8%, bolstered by strength in the mega-cap components. The S&P 500, meanwhile, eked out a 0.2% gain while the Dow Jones Industrial Average settled with a modest 0.4% decline.
The turnaround effort began right about the time European markets closed. Most bourses were saddled with large losses pushing 3.00% as recession worries took root in conjunction with the euro falling to a 20-year low against the dollar. EUR/USD traded down to 1.0235, bringing it close to parity with the greenback, but stood at 1.0267 (-1.5%) as of this writing.
That weakness bled into the U.S. market, sinking the cyclical stocks in the early stages of trading. Everything went lower, however, evidenced by an advance-decline line at the NYSE that favored decliners by a better than 6-to-1 margin. By the close, decliners led by a 9-to-7 margin.
The growth concerns were apparent in the underperformance of the cyclical stocks, yet they were most acute in the behavior of the Treasury and commodity markets.
The 2s10s spread inverted by a basis point. The 2-yr note yield settled its session down a basis point at 2.82% and the 10-yr note yield settled its session down eight basis points at 2.81%. Separately, WTI crude futures plummeted 8.1% to $99.34/bbl, unleaded gasoline futures dropped 9.0% to $3.34/gal, and copper futures fell 5.6% to $3.42/lb.
That move in the energy complex undercut the S&P 500 energy sector (-4.0%), but it became a relief point for the broader market seeking some inflation relief. If nothing else, traders latched onto the commodity price breakdown as a turnaround catalyst.
Some will call attention to the drop in the 10-yr note yield as another relief point, but it would be remiss not to add that the 10-yr note yield was sitting around 2.81% when stocks sold off at the open. The implication is that the commodity price action was the principal driver of today's turnaround action.
The Dow, Nasdaq, and S&P 500 all closed pretty much at their highs for the day. The S&P 500 was paced by the communication services (+2.7%), consumer discretionary (+2.3%), and information technology (+1.2%) sectors, which were led by the likes of Alphabet (GOOG 2277.74, +96.12, +4.4%), Meta Platforms (META 168.19, +8.16, +5.1%), Amazon.com (AMZN 113.50, +3.94, +3.6%), and Apple (AAPL 141.56, +2.63, +1.9%).
Today's worst-performing sectors were energy (-4.0%), utilities (-3.4%), materials (-2.0%), and industrials (-1.5%).
The Vanguard Mega-Cap Growth ETF (MGK) ended the day up 1.8%, whereas the Invesco S&P 500 Equal Weight ETF (RSP) closed down 0.3%.
Reviewing today's economic data:
- Factory orders for manufactured goods increased 1.6% m/m in May (consensus +0.5%) following an upwardly revised 0.7% increase (from 0.3%) in April. Shipments of manufactured goods rose 1.8% after increasing 0.6% in April.
- The key takeaway from the report is the understanding that order activity was much stronger than expected in May; however, the market isn't responding to that consideration so much as it is responding to the notion that order activity is apt to weaken in coming months as global economic activity slows.
Looking ahead, market participants will be focused on the May Jolts - Job Openings and June ISM Non-Manufacturing Index reports at 10:00 a.m. ET on Wednesday along with the release of the minutes for the June 14-15 FOMC meeting at 2:00 p.m. ET.
- Dow Jones Industrial Average: -14.8% YTD
- S&P 400: -19.4% YTD
- S&P 500: -19.6% YTD
- Russell 2000: -22.5% YTD
- Nasdaq Composite: -27.6% YTD