Closing Stock Market SummaryThe S&P 500 decreased 0.5% on Friday in a mostly negative session. A modest bounce in the growth stocks lifted the Nasdaq Composite (+0.6%) to a positive close, while the Dow Jones Industrial Average fell 1.5% amid weakness in many of its value-oriented components. The Russell 2000 (+0.04%) finished little changed.
Long-term interest rates pulled back today, which provided some relief for the mega-cap/growth stocks within the S&P 500 information technology (+0.6%), consumer discretionary (+0.6%), and communication services (+0.03%) sectors. Demand for Treasuries was attributed to technical factors and month-end rebalancing.
The 10-yr yield decreased six basis points to 1.46%. The 2-yr yield decreased three basis points to 0.13%. The U.S. Dollar Index rose 0.9% to 90.92.
The retracement in yields, however, didn't translate to a risk-on mindset. The other eight S&P 500 sectors closed in negative territory, including the energy (-2.3%) and financials (-2.0%) sectors at the bottom of the pack with 2% declines. In addition, declining issues outpaced advancing issues at the NYSE and Nasdaq.
Energy and financial stocks were burdened by lower oil prices ($61.45/bbl, -2.02, -3.2%) and the curve-flattening activity in the Treasury market. Value stocks, in general, faced profit-taking interest after a strong month that saw the iShares Russell 1000 Value ETF (IWD 143.42, -1.86, -1.3%) rise 6.0%, versus the 2.6% monthly gain in the S&P 500.
Interestingly, the S&P 500 briefly fell below its 50-day moving average (3809) early in the morning. The ability to attract buyers below the key technical level was viewed as an encouraging sign for bullish investors, although follow-through buying was meek and sellers regained control of the market into the close. The S&P 500 still closed above this level.
Salesforce (CRM 216.50, -14.58, -6.3%) was an additional drag on the Dow despite reporting better-than-expected earnings results and providing upbeat guidance. CRM shares fell 6%.
Separately, the Personal Income and Spending Report for January revealed muted inflation pressure and a personal savings rate of 20.5%, suggesting that even before another round of stimulus checks, households have the potential to drive further economic growth.
Reviewing Friday's economic data:
- Personal income, bolstered by government social benefits, soared 10.0% m/m in January (consensus 9.7%). Personal spending increased 2.4% m/m (consensus +2.3%). The PCE Price Index and Core PCE Price Index, which excludes food and energy, were both up 0.3%. That left yr/yr price changes at 1.5% (from 1.3% in December) and 1.5% (from 1.4% in December), respectively.
- The key takeaway from the report is twofold: (1) it shows aggregate inflation pressures were still tame in January and (2) the report exposes the potential for a major pickup in spending by way of a personal savings rate that stands at 20.5% as a percentage of disposable personal income (and that's before the next round of stimulus checks get sent out)!
- The final reading for the February University of Michigan Index of Consumer Sentiment was revised up to 76.8 (consensus 76.4) from the preliminary reading of 76.2. The final February reading was below the final reading of 79.0 for January.
- The key takeaway from the report is that the downturn in February was driven by views on future economic prospects among households with incomes below $75,000. Another key takeaway, though, is that the year ahead inflation rate was expected to be 3.3% versus 3.0% in January and 2.5% in December.
- The Chicago PMI for February decreased to 59.5 (consensus 60.0) from an unrevised 63.8 in December.
- The Advance report for International Trade in Goods for January showed a deficit of $83.7 billion versus $83.2 billion in December. The Advance report for Retail Inventories for January decreased 0.6%, while the Advance report for Wholesale Inventories for January increased 1.3%.
Looking ahead, investors will receive ISM Manufacturing Index for February, Construction Spending for January, and the final IHS Markit Manufacturing PMI for February on Monday.
- Russell 2000 +11.5% YTD
- Nasdaq Composite +2.4% YTD
- S&P 500 +1.5% YTD
- Dow Jones Industrial Average +1.1% YTD