Closing Market Summary: Cyclical Sectors Pace Broad Retreat
The stock market ended the Tuesday session on the lows after spending the entire day in negative territory. The Russell 2000 led the way, sliding 1.7%, while the S&P 500 lost 1.5% with all ten sectors ending in the red.
Equity indices were pressured from the start with the early weakness being attributed to a disappointing Industrial Production report from Germany (-4.0%; expected -1.5%), which represented the largest drop in activity in almost six years. Growth concerns were also on the mind of IMF economists as the Fund lowered its 2015 global growth forecast to 3.8% from 4.0%.
Fittingly, the macroeconomic worries weighed on most cyclical sectors, while energy (-1.3%) tried to withstand the broad pressure. The sector, which lost 3.8% last week, displayed modest intraday strength, but slumped in the afternoon amid a noteworthy drop in crude prices (-1.7% to $88.81/bbl).
Elsewhere among cyclical sectors, the industrial space (-2.4%) spent the bulk of the day at the bottom of the leaderboard. Transports contributed to the weakness, but defense stocks did not fare much better as evidenced by a 2.1% decline in the PHLX Defense Index. As for transports, the Dow Jones Transportation Average lost 2.5% to widen this week's decline to 3.6%.
Other high-growth areas like chipmakers and biotechnology also struggled to keep up with the broader market. The PHLX Semiconductor Index lost 1.9% to extend its month-to-date decline to 5.1% with just five October sessions in the rear-view mirror.
For its part, the biotech group slumped at the open, halved its loss by midday, but returned to lows before the close. The iShares Nasdaq Biotechnology ETF (IBB 266.62, -5.10) lost 1.9%, while the health care sector (-1.6%) ended among the laggards.
Meanwhile, the remaining countercyclical sectors displayed slimmer losses than the broader market with utilities (-0.1%) registering the smallest decline.
Generally speaking, today's retreat reflected big picture concerns, thus putting corporate-specific developments on the backburner. To that latter point, Sodastream (SODA 21.52, -6.05) plunged 21.9% after guiding Q3 results well below analyst estimates. On a similar note, AGCO Corporation (AGCO 42.13, -4.97) sank 10.6% after priming the market for disappointing results.
The broad retreat fueled increased demand for volatility protection, sending the CBOE Volatility Index (VIX 17.21, +1.75) to its highest close since mid-March.
The safe-haven demand underpinned Treasuries with the 10-yr note (+21/32) spending the entire day in a steady rally. As a result, the benchmark yield fell eight basis points to 2.34%.
Today's participation was ahead of average with more than 770 million shares changing hands at the NYSE.
Economic data was limited to JOLTS and Consumer Credit:Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET, while the minutes from the Sept 17 FOMC meeting will be released at 14:00 ET.
- The Job Openings and Labor Turnover Survey for August indicated job opening increased to 4.835 million from 4.605 million
- Consumer credit increased by $13.50 billion in August, down from a downwardly revised $21.60 billion (from $26.00 billion) in July, while the consensus expected an increase of $20.00 billion
- Nasdaq Composite +5.0% YTD
- S&P 500 +4.7% YTD
- Dow Jones Industrial Average +0.9% YTD
- Russell 2000 -7.5% YTD