Closing Market Summary: S&P 500 Pulls Back from Midterm Election SpikeThe S&P 500 lost 0.9% on Friday, with the pullback suggesting a natural consequence of an overreaction to this week's election spike. The Dow Jones Industrial Average lost 0.8%, the Nasdaq Composite lost 1.7%, and the Russell 2000 lost 1.8%. For the week, the S&P 500 advanced 2.1%.
Outperforming the broader market on Friday were the defensive-oriented consumer staples (+0.5%), real estate (+0.1%), and utilities (+0.1%) sectors. Conversely, FANG stocks within the lagging communication services (-1.5%), consumer discretionary (-1.5%), and information technology (-1.7%) sectors underperformed. Netflix led the FANG group lower with a loss of 4.6%. Apple (AAPL 204.47, -4.02), Amazon (AMZN 1712.43, -42.48), Alphabet (GOOG 1066.15, -16.25), and Facebook (FB 144.96, -2.91) bared losses between 1.5% and 2.4%.
Chip stocks dragged on the lagging tech sector, as key Apple supplier Skyworks Solutions (SWKS 766.66, -6.74) fell 8.1% after it issued below-consensus top and bottom line guidance for its fiscal first quarter. Its guidance has extended a trend within the semiconductor industry that has warned of slowing chip demand. The Philadelphia Semiconductor Index lost 1.9%.
In other corporate news, Walt Disney (DIS 118.00, +2.00, +1.7%) rose after an upbeat earnings report, while General Electric (GE 8.58, -0.52, -5.7%) took a hit after JPMorgan cut its price target on the stock to $6 from $10. In response, the former Dow component responded that it is a "fundamentally strong company with a sound liquidity position," according to a CNBC report.
Demand for Treasuries increased amid the equity setback, pushing yields lower across the curve. The 2-yr yield lost four basis points to 2.93%, and the 10-yr yield lost five basis points to 3.19%. For the week, the 2-yr yield added two basis points, while the 10-yr yield shed two basis points.
Separately, WTI crude, which is the U.S. benchmark for oil, fell 0.9% to settle at $60.16/bbl. Friday's loss has extended its decline to 21.8% from its Oct 3 four-year high. On a related note, the oil-sensitive energy sector lost 0.4% on Friday.
In economic data, the Producer Price Index (Briefing.com consensus +0.2%) for October was released on Friday morning, showing a higher-than-expected increase of 0.6%. The core reading, which excludes the volatile prices of food and energy, also came in above consensus (+0.5% actual vs +0.2% Briefing.com consensus). The headline pressures stoked concerns about pass-through inflation to consumers and, in turn, helped to strengthen the Fed's case for additional rate hikes.
In trade news, White House National Trade Council Director Peter Navarro made some combative comments against CEOs for pushing President Trump to make a trade deal with China and stated a trade deal will be on the president's terms. Separately, President Trump has reportedly been telling associates that he wants to replace Commerce Secretary Wilbur Ross by the end of the year.
Overseas, China reported just a 0.2% rise in its Consumer Price Index on Friday, which was in-line with estimates but significantly below last month's increase of 0.7%. Its softening inflation has continued to fuel concerns over a slowing Chinese economy.
Reviewing Friday's economic data, which included the Producer Price Index for October, the preliminary reading of the University of Michigan Consumer Sentiment Index for November, and the Wholesale Inventories report for September:
- The key takeaway from the report is that it will stoke concerns about pass-through inflation to the consumer, which have already been stoked by numerous companies during the third quarter earnings-reporting period talking about higher input costs and increasing prices.
- The key takeaway from the report is that stock market sell-off in October had no real impact on consumer sentiment, which was rooted more in favorable views about income expectations and job growth that are key drivers of consumer spending.
- The key takeaway from the report is that sales are increasing year-over-year at a faster rate than inventories, which can be a precursor to improved pricing power for wholesalers.
Looking ahead, investors will not receive any economic data on Monday.
- Nasdaq Composite +7.3% YTD
- Dow Jones Industrial Average +5.1% YTD
- S&P 500 +4.0% YTD
- Russell 2000 +0.9% YTD