Closing Market Summary: Third Consecutive Decline Pressures S&P 500 Below 50-Day Average
The stock market registered its third consecutive decline on Thursday with the Dow Jones Industrial Average surrendering 0.7% while the S&P 500 (-0.6%) and Nasdaq Composite (-0.5%) posted slimmer losses.
Equities spent the first two hours of action near their flat lines before sliding to session lows amid selling pressure in heavily-weighted sectors like consumer discretionary (-0.6%), financials (-0.8%), and industrials (-0.9%). That being said, all ten sectors ended the day with losses, but relative strength in the top-weighted technology sector (-0.3%) prevented the market from ending deeper in the red. Taking a look at the bigger picture, the S&P 500 settled below its 50-day moving average (2,103) for the first time in nearly two weeks.
Quarterly earnings were in focus on Thursday after more than 175 companies reported their results since Wednesday's closing bell. Broadly speaking, bottom-line beats were commonplace, but many companies failed to show year-over-year revenue growth.
Four Dow components were among those reporting and all four ended the day with losses. American Express (AXP 77.01, -1.98) and 3M (MMM 149.50, -5.91) lost 2.5% and 3.8%, respectively, after reporting bottom-line beats on below-consensus revenue while Caterpillar (CAT 76.88, -2.88) fell 3.6% in reaction to an in-line report and lowered guidance. For its part, McDonald's (MCD 97.09, -0.49) lost 0.5% despite reporting a three-cent beat.
The four Dow members pressured their respective sectors while technology (-0.3%) settled ahead of the broader market thanks to gains among chipmakers. The PHLX Semiconductor Index gained 1.5% after being up as much as 2.7% in the early going. Only five index members ended in the red while SanDisk (SNDK 63.70, +9.52) soared 17.6% after beating earnings and revenue expectations. As for large cap tech components, Apple (AAPL 125.16, -0.06) and Microsoft (MSFT 46.11, +0.57) registered gains while Qualcomm (QCOM 61.75, -2.44) dropped 3.8% after its cautious guidance overshadowed a bottom-line beat. Also of note, the company announced plans to reduce its semiconductor division by about 15%.
Similar to technology, the energy sector (-0.3%) finished ahead of the broader market even though crude oil lost 1.8%, ending the pit session at $48.39/bbl. Including today's decline, the energy sector is down 2.1% for the week and lower by 5.5% since the end of June.
Over on the countercyclical side, utilities (-1.5%) underperformed throughout the day while consumer staples (-0.4%), health care (-0.3%), and telecom services (-0.6%) settled closer to the broader market.
The modest loss in the health care sector masked a 2.2% spike in the shares of Cigna (CI 154.36, +3.29) after the Wall Street Journal reported the company is close to being acquired by Anthem (ANTM 155.21, +0.11) for about $188/share.
Treasuries maintained narrow ranges overnight, but climbed during the session with the 10-yr yield falling five basis points to 2.27%.
Today's participation was ahead of recent averages with more than 835 million shares changing hands at the NYSE floor.
Economic data was limited to Initial Claims and Leading Indicators:Tomorrow's economic data will be limited to the New Home Sales report for June, which will be released at 10:00 ET (consensus 550K).
- The initial claims level plummeted to 255,000 for the week ending July 18 from an unrevised 281,000 while the consensus expected a decline to 279,000
- That was the lowest initial claims reading since November 1973 when claims dropped to 233,000
- The BLS reported that there were no special factors that impacted this week's claims reading
- The continuing claims level declined to 2.207 million for the week ending July 11 from an upwardly revised 2.216 million (from 2.215 million) while the consensus expected a decrease to 2.213 million
- The Leading Indicators report for June was up 0.6% while the consensus expected an increase of 0.2%
- Nasdaq Composite +8.7% YTD
- Russell 2000 +3.3% YTD
- S&P 500 +2.1% YTD
- Dow Jones Industrial Average -0.5% YTD