Closing Summary - Five Up, Five Down for S&P 500
The drive for five continued today and it was a success. For the fifth straight session, the S&P 500 ended lower. Like the previous four sessions, though, the losses were fairly modest in scope. The S&P 500 declined 0.4%, bringing its total loss for the five sessions to 22 points or 1.2%. All in all, that still qualifies as a pretty tame slide considering the S&P 500 had risen 150 points, or 9.1%, over the previous eight weeks.Today's retreat came on moderate volume of 700 mln shares at the NYSE and was blamed on concerns the Fed might taper its asset purchase program as early as this month following some better-than-expected initial claims and Q3 GDP data. The headline print for each certainly aided such thinking. Initial claims for the week ending November 30 checked in at just 298,000 (Briefing.com consensus 330,000) while the second estimate for Q3 GDP jumped to 3.6% (Briefing.com consensus 3.0%) from 2.8%.
The headlines had an undeniably encouraging feel to them. That was the first sub-300,000 print for initial claims since early September and the 3.6% growth in Q3 GDP was the strongest since the second quarter of 2010.
Upon closer review, though, the headlines were a little misleading. The Department of Labor acknowledged that seasonal adjustment problems biased the claims number lower (which means we are likely to see a higher print in subsequent weeks) while the change in private inventories accounted for 1.68 percentage points of Q3 GDP growth. Take the change in inventories out of the equation and real final sales were up just 1.9% versus 2.0% in the first estimate. Furthermore, the 1.4% growth rate in personal consumption expenditures was the lowest rate since the fourth quarter of 2009.
A big jump in inventories and a deceleration in personal spending isn't exactly a combination befitting a robust growth picture. In that context, the tapering trade in our estimation probably had more to do today with the angst surrounding the November employment report on Friday than it did with a true read of today's data.
Following the strong ADP Employment Change report on Wednesday, there is a presumption that the nonfarm payrolls number on Friday will also produce a positive surprise. The Briefing.com consensus estimate for nonfarm payrolls is set at 188,000 and at 200,000 for nonfarm private payrolls. Some of that angst was reflected in the Treasury market today, which spent the entire session on the defensive. The 10-yr note dipped eight ticks and its yield rose three basis points to 2.87%.
That bump in long-term rates weighed on rate-sensitive sectors in the stock market, like the financials sector (-0.9%), and particularly those sectors known for their higher dividend yields -- telecom services (-1.0%), utilities (-0.7%), and consumer staples (-0.9%).
Today's profit-taking action was centered primarily on large-cap issues. The Dow Jones Industrial Average, S&P 500, and Nasdaq 100 all finished lower while the Russell 2000 (+0.1%) and S&P 400 Midcap Index (+0.1%) scored small gains.
Gains in a handful of influential large-cap stocks like Apple (AAPL 567.90, +2.90), Boeing (BA 132.72, +1.22), 3M (MMM 126.84, +0.38), Intel (INTC 24.27, +0.53), and Tiffany & Co. (TIF 89.71, +1.13) helped limit today's losses, yet every sector in the S&P still finished in red figures with the exception of the industrials sector which was unchanged.
Another laggard of note today was the US Dollar Index (80.27, -0.35). It got clipped largely on account of the euro taking off after the ECB elected to keep its main lending rate unchanged and ECB President Draghi avoided any telltale hint at his press conference that further easing measures would be implemented in the very near future. The euro crossed at 1.3669 against the dollar, up 0.6% from yesterday.
The dollar weakness did not benefit commodities much and it certainly didn't help gold prices, which slipped 1.7% to $1225.80/oz.
Friday's action is sure to be dictated by the details of the November employment report and the direction long-term interest rates take in its wake.
- Nasdaq +33.6% YTD
- Russell 2000 +32.1% YTD
- S&P 500 +25.2% YTD
- DJIA +20.8% YTD