Closing Stock Market SummaryThe S&P 500 declined 0.5% on Thursday, as risk sentiment remained pressured by underlying growth concerns in this downwards-trending market. The Nasdaq Composite (-0.3%) and Dow Jones Industrial Average (-0.8%) also closed lower, while the Russell 2000 (+0.1%) closed slightly higher.
Eight of the 11 S&P 500 sectors closed lower in a choppy, back-and-forth session. The consumer staples (-2.0%), information technology (-1.1%), and industrials (-0.9%) sectors were the weakest performers, while the materials (+0.7%), consumer discretionary (+0.1%), and health care (+0.2%) sectors eked out gains.
Growth concerns were reinforced by another batch of disappointing corporate updates and economic data in addition to elevated oil prices ($109.91, +0.56, +0.5%), which hovered near $110 per barrel.
In the corporate space, Cisco (CSCO 41.72, -6.64, -13.7%) dropped 14% after missing revenue estimates and issuing downside quarterly guidance amid persisting supply chain issues. Bath & Body Works (BBWI 40.03, -2.92, -6.8%), Kohl's (KSS 45.04, +1.91, +4.4%), and The Children's Place (PLCE 47.74, +4.52, +10.5%) were the latest retailers that issued disappointing guidance.
Continued bleeding in Walmart (WMT 119.07, -3.41, -2.8%) and Target (TGT 153.43, -8.18, -5.1%), both of whom stoked profit-margin concerns this week, was another drag on sentiment that discouraged dip-buying efforts. On top of that, Citigroup downgraded Union Pacific (UNP 216.42, -8.57, -3.8%), CSX (CSX 30.94, -1.38, -4.3%), and Norfolk Southern (NSC 228.03, -9.54, -4.0%) to Neutral from Buy.
Specifying the data, weekly initial claims were higher than expected at 218,000 ( consensus 200,000), the Philadelphia Fed Index dropped to 2.6 in May (Briefing.com consensus 16.5), the Conference Board's Leading Economic Index (LEI) decreased 0.3% m/m in April (consensus 0.0%), and existing home sales fell 2.4% m/m in April to a seasonally adjusted annual rate of 5.61 million (consensus 5.65 million).
The Treasury market, meanwhile, was a strong indicator for these underlying growth concerns, as demand drove yields lower across the curve. The 2-yr yield declined seven basis points to 2.61%, and the 10-yr yield declined three basis points to 2.86% after touching 2.78% in the wake of the weekly claims and Philadelphia Fed Index releases.
Reviewing Thursday's economic data:
- Initial claims for the week ending May 14 increased by 21,000 to 218,000 (consensus 200,000). That remains a low number historically, but relative to expectations it was a disappointment. Continuing claims for the week ending May 7, however, decreased by 25,000 to 1.317 million.
- The key takeaway from the report is that it covers the week in which the survey for the May employment report was conducted. The relatively low number of initial claims will support an outlook for another strong month of nonfarm payroll gains.
- Existing home sales decreased 2.4% month-over-month in April to a seasonally adjusted annual rate of 5.61 million (Briefing.com consensus 5.65 million) versus a downwardly revised 5.75 million (from 5.77 million) in March.
- The key takeaway from the report is that the supply of available homes for sale remains extremely tight, yet higher mortgage rates and home price inflation are contributing to a slowdown in buyer demand rooted in affordability pressures that are expected to persist.
- The Philadelphia Fed Index for May decreased to 2.6 (consensus 16.5) from 17.6 in April.
- The Conference Board's Leading Economic Index (LEI) decreased 0.3% m/m in April (consensus 0.0%) following a revised 0.1% increase (from 0.3%) in March.
There is no economic data scheduled for Friday.
- Dow Jones Industrial Average -14.0% YTD
- S&P 500 -18.2% YTD
- Russell 2000 -20.9% YTD
- Nasdaq Composite -27.2% YTD