Closing Stock Market SummaryThe S&P 500 declined 2.2% on Wednesday, as the release of historically weak economic data undercut risk sentiment. The Dow Jones Industrial Average lost 1.9%, the Nasdaq Composite lost 1.4% to snap a four-session winning streak, and the Russell 2000 underperformed with a 4.3% decline.
Highlighting the data: retail sales declined 8.7% m/m in March (Briefing.com consensus -10.0%), industrial production declined 5.4% m/m in March (Briefing.com consensus -3.3%), the Empire State Manufacturing Survey for April plunged 57 points to -78.2 (Briefing.com consensus -32.0), and the NAHB Housing Market Index for April plunged 42 points to 30 (Briefing.com consensus 57).
In addition, more banks bolstered their loan-loss reserves to prepare for tougher times ahead, the Fed's Beige Book for April noted a sharp contraction in economic activity with business contacts expecting conditions to worsen, and The Wall Street Journal reported that the Paycheck Protection Program for small businesses was on pace to run out of money today.
The plethora of reminders that economic conditions are woeful contributed to losses in all 11 S&P 500 sectors, but the S&P 500 remarkably still finished above Monday's closing level. The financials sector (-4.3%) was an influential laggard following earnings reports from Bank of America (BAC 22.19, -1.54, -6.5%), Citigroup (C 42.86, -2.56, -5.6%), and Goldman Sachs (GS 178.52, +0.29, +0.2%).
The energy sector (-4.7%) declined the most, though, as the group remained pressured by lower oil prices after the EIA projected a 9.2 mb/d decline in oil demand in 2020. WTI crude futures settled just below $20.00/bbl, losing 1.3%, or $0.27, to $19.95/bbl.
UnitedHealth (UNH 281.68, +11.18, +4.1%) was a notable standout after the Dow component reported better-than-expected earnings results. Its outperformance limited the decline in the health care sector (-0.5%).
Separately, airline stocks finished mixed after the companies reached individual agreements with the government for payroll relief. Shares of American Airlines (AAL 12.29, +0.35, +2.9%) closed higher, while Delta Air Lines (DAL 24.35, -0.19, -0.8%) closed lower.
Longer-dated U.S. Treasuries exhibited strength in a textbook trade given the negative economic data and decline in stocks. The 2-yr yield declined two basis points to 0.20%, and the 10-yr yield declined 11 basis points to 0.64%. The U.S. Dollar Index increased 0.7% to 99.57.
Reviewing Wednesday's big batch of data:
- Retail sales declined 8.7% m/m in March (consensus -10.0%) following an upwardly revised 0.4% decline (from -0.5%) in February. Excluding autos, sales declined 4.5% (Briefing.com consensus -7.6%) following an unrevised 0.4% decline in February.
- The key takeaway from the report is that it captured the impact of the COVID-19 shutdown situation, as spending in discretionary categories cratered while spending for essential items accelerated in a big way.
- Industrial production declined 5.4% m/m in March (consensus -3.3%) following a downwardly revised 0.5% increase (from 0.6%) in February. Total capacity utilization was 72.7% (consensus 74.1%) following an unrevised 77.0% in February.
- The key takeaway from the report is that it captures the severity of the shutdown situation, best reflected in the pronouncement that the downturn in industrial production was the worst since 1946.
- The New York Fed's Empire State Manufacturing Survey plummeted 57 points to -78.2 (consensus -32.0).
- The NAHB Housing Market Index for April plunged to 30 (consensus 57) from 72 in March.
- Business inventories decreased 0.4% in February, as expected, while the January reading was revised down to -0.3% from -0.1%.
- The Mortgage Bankers Applications Index increased 7.3% week-over-week.
Looking ahead, investors will receive the weekly Initial and Continuing Claims, Housing Starts and Building Permits for March, and the Philadelphia Fed Index for April on Thursday.
- Nasdaq Composite -6.5% YTD
- S&P 500 -13..9% YTD
- Dow Jones Industrial Average -17.6% YTD
- Russell 2000 -29.1% YTD