Closing Stock Market SummaryThe stock market had a good run in the morning trade that saw the S&P 500, Dow Jones Industrial Average, and Nasdaq each gain 1.0% at their highs. The market had a quick, and sharp, reversal in the afternoon, however, following a Bloomberg TV report that Gazprom is going to keep the Nord Stream 1 pipeline shutdown due to a "technical issue" that involves an oil leak. Additionally, there was no timetable provided for when the pipeline might reopen.
The morning gains were driven by a belief that less strong August employment data (versus July) could compel the Fed to take a less aggressive rate-hike path. The Gazprom news, which came on the heels of G7 members agreeing to impose a price cap on exports of Russian oil, quickly took over investor mentality.
Shortly after the open, market breadth showed advancers leading decliners by a 7-to-2 margin at the NYSE and a 3-to-2 margin at the Nasdaq. At the close, decliners led advancers by a roughly 3-to-2 margin at both the NYSE and the Nasdaq.
Mega cap stocks were an influential downside driver in the afternoon trade but they had plenty of company as a risk-off mentality took root following the Gazprom news and ahead of the extended holiday weekend.
Every S&P 500 sector reached positive territory this morning before the downside momentum left all the sectors in the red, with the exception of energy (+1.8%).
The energy sector benefited from the rising cost of oil in a notably volatile session for the energy complex futures. WTI crude oil futures settled 0.5% higher at $86.91/bbl. Natural gas futures fell 5.4% to $8.75/mmbtu.
The Treasury market also had a dynamic session with the 2-yr note yield ultimately falling 12 basis points to 3.40% while the 10-yr note yield fell seven basis points to 3.20%.
As a reminder, US equity markets are closed Monday.
Looking ahead to Tuesday, market participants will receive the final August IHS Markit Services PMI reading (prior 44.1) at 9:45 a.m. ET. The August ISM Non-Manufacturing Index (consensus 55.2%; prior 56.7%) will be out at 10:00 a.m. ET.
Reviewing today's economic data:
- August nonfarm payrolls increased by 315,000, average hourly earnings rose a smaller-than-expected 0.3% month-over-month, and the unemployment rate ticked up to 3.7% from 3.5% as the labor force participation rate jumped to 62.4% from 62.1%.
- The key takeaway is that the labor market remains in pretty solid shape. It didn't function with the same zest it showed in July, but, objectively, it is running at a pace that is wholly inconsistent with an economy on the cusp of a recession.
- Factory orders for manufactured goods declined 1.0% m/m in July (consensus +0.2%) following a downwardly revised 1.8% increase (from 2.0%) in June. Shipments of manufactured goods declined 0.9% after increasing 0.8% in June.
- The key takeaway from the report is that this was the first decline in order activity in ten months, meaning it could simply be a natural pullback after an extended period of new order increases as opposed to a meaningful turning point. Alas, future reports are needed to shed better light on the situation.
Dow Jones Industrial Average: -13.8% YTD
S&P 400: -15.8% YTD
S&P 500: -17.7% YTD
Russell 2000: -19.4% YTD
Nasdaq Composite: -25.7% YTD