Closing Stock Market SummaryConcerns over an economic slowdown were driving today's sell-off, along with the surprisingly large fallout in bank stocks on no news. In addition, worries about the debt ceiling weighed on investors' sentiment after Treasury Secretary Yellen warned that the Treasury is unlikely to be able to continue to satisfy all of the government's obligations by June, and potentially as early as June 1.
The S&P 500, which hit 4,186 at its high yesterday, briefly slipped below the 4,100 level today. Ultimately, the major indices were able to close off their worst levels of the day, albeit still sporting losses of at least 1.1%.
Today's downbeat price action comes ahead of an FOMC policy decision tomorrow, where a 25 basis point rate hike is expected but the tone of the directive and Fed Chair Powell's remarks is still indeterminate.
The bank stock sell-off was presumably tied to concerns about an economic slowdown weighing on earnings estimates. PacWest (PACW 6.55, -2.52, -27.8%) and Western Alliance (WAL 30.93, -5.51, -15.1%) were some of the biggest losers in the regional bank space; however, even larger banks that had been viewed as potentially benefitting from the fallout in the regional bank industry, like JPMorgan Chase (JPM 138.92, -2.28, -1.6%) and Bank of America (BAC 28.16, -0.88, -3.0%), underperformed the broader market.
Slowdown concerns were fueled by some manufacturing PMI readings for April out of the eurozone that were weaker than March, a JOLTs - Job Openings Report for March that showed openings shrinking to 9.590 million from 9.974 million in February, and a 0.6% decline in nondefense capital goods orders, excluding aircraft, for March.
Global growth concerns also manifested themselves in falling commodity prices. WTI crude oil futures sank 5.4% to $71.72/bbl and copper futures declined 1.6% to $3.87/lb.
The sharp decline in oil prices contributed to the underperformance of the S&P 500 energy sector (-4.3%), which logged the biggest decline by a sizable margin. Unsurprisingly, the financials sector (-2.3%) was another top laggard today.
The consumer discretionary sector (+0.2%) was the lone standout in positive territory thanks to gain in Amazon.com (AMZN 103.63, +1.58, +1.6%).
In the Treasury market, the nervousness about the debt ceiling issue, an economic slowdown, and the behavior of the bank stocks fueled buying interest in most tenors. The 2-yr Treasury note yield sank 15 basis points to 3.97% and the 10-yr note yield fell 14 basis points to 3.44%.
- Nasdaq Composite: +15.4% YTD
- S&P 500: +7.3% YTD
- Dow Jones Industrial Average: +1.6% YTD
- S&P Midcap 400: +1.0% YTD
- Russell 2000: -1.7% YTD
Reviewing today's economic data:
- March Factory Orders 0.9% ( consensus 1.4%); Prior was revised to -1.1% from -0.7%
- The key takeaway from the report is that factory orders weren't as robust as they appear at first blush. Nondefense aircraft and parts orders, up 78.3%, drove the increase. Excluding transportation, new orders were down 0.7% month-over-month for the second straight month.
- March JOLTS - Job Openings 9.590 mln; Prior was revised to 9.974 mln from 9.931 mln
Ahead of Wednesday's open, CVS Health (CVS), Phillips 66 (PSX), Kraft Heinz (KHC), Exelon (EXC), CDW (CDW), Adient (ADNT), Estee Lauder (EL), Emerson (EMR), Builders FirstSource (BLDR), Yum! Brands (YUM), Scotts Miracle-Gro (SMG), Hanesbrands (HBI), Garmin (GRMN), and Generac (GNRC) are among the more notable companies reporting earnings.
Market participants will receive the following economic data tomorrow:
- 7:00 ET: Weekly MBA Mortgage Index (prior 3.7%)
- 8:15 ET: April ADP Employment Change ( consensus 142,000; prior 145,000)
- 9:45 ET: Final April IHS Markit Services PMI (prior 53.7)
- 10:00 ET: April ISM Non-Manufacturing Index (consensus 51.9%; prior 51.2%)
- 10:30 ET: Weekly crude oil inventories (prior -5.05 mln)
- 14:00 ET: May FOMC Decision ( consensus 5.00-5.25%; prior 4.75-5.00%)