Closing Market SummaryThe stock market could not hold onto its late session gains from Wednesday, succumbing to aggressive selling. The S&P 500 (-3.3%) and Nasdaq Composite (-4.1%) were on a slow decline most of the day with the Dow Jones Industrial Average (-2.4%) exhibiting more volatile price action.
The stage was set before today's open with several central banks announcing a shift to more aggressive policies. These shifts coming on the heels of the Fed raising the fed funds rate by 75 basis points exacerbated existing worries about growth and earnings.
The Swiss National Bank announced a surprise rate hike of 50 basis points, the Bank of England increased its key rate by 25 basis points while also projecting a decline of 0.3% in Q2 GDP, and Brazil's central bank raised its key rate by 50 basis points.
The added rub is that their moves are generally being perceived as a catch-up trade, which is feeding worries about a policy mistake that leads to a recession.
Treasuries faced some selling at the start of the session, but they rebounded strongly as stocks struggled, sending the 10-yr yield lower by nine basis points to 3.31% while the 2-yr yield fell eleven basis points to 3.16%.
Stagflation worries were in today's trading mix, emanating from the ongoing inflation pressures and the Atlanta Fed's GDPNow model estimating Q2 real GDP to be flat versus a prior projection calling for 0.9% growth.
With these factors on the forefront, the sell-off was broad-based. The declining issues outpaced the advancing issues by a greater than 9-to-1 margin at the NYSE and an almost 4-to-1 margin at the Nasdaq. Today's session saw above-average volume with more than 1.3 bln shares changing hands at the NYSE floor.
All 11 of the S&P 500 sectors closed in the red with the selling paced by energy (-5.6%), consumer discretionary (-4.8%), information technology (-4.1%), and materials (-3.7%). The best performing sectors were the consumer staples (-0.7%), health care (-1.5%), and the utilities (-1.9%), but they could not stay out of the red.
Profit-taking in the best performing sector of the year narrowed energy's year-to-date gain to 39.2% while the remaining ten groups now show year-to-date losses between 9.2% (utilities) and 34.7% (consumer discretionary).
The energy sector finished near its session low even though crude oil recovered its early loss to end the pit session little changed at $115.28/bbl. WTI crude climbed toward the midpoint of yesterday's range in after-hours trade, but the late rally failed to lift the energy sector out of the last slot on today's leaderboard.
Top-weighted technology suffered from broad-based losses with roughly half of its components hitting fresh 52-week lows. Top component Apple (AAPL 130.06, -5.37, -4.0%) stopped within a point of a 52-week low of its own, but still lost more than 4.0% while Adobe (ADBE 365.08, -11.84, -3.1%) fell to its lowest level in over two years ahead of tonight's release of quarterly results. Chipmakers had an even worse showing than the tech sector, as the PHLX Semiconductor Index fell 6.2%.
Reviewing today's data:
- Housing starts declined 14.4% month-over-month in May to a seasonally adjusted annual rate of 1.549 million units (consensus 1.730 million) while building permits -- a leading indicator -- declined 7.0% month-over-month to 1.695 million (consensus 1.800 million).
- The key takeaway from the report was the broad-based softness in single-family starts and permits. To that end, starts declined month-over-month in three of the four geographic regions while permits declined in all regions with the largest region -- the South -- seeing the largest decline in permits.
- Initial jobless claims for the week ending June 11 decreased by 3,000 to 229,000 (consensus 215,000) while continuing jobless claims for the week ending June 4 increased by 3,000 to 1.312 million.
- The key takeaway from the report is that the improvement in initial jobless claims appears to have stalled, suggesting it could be hitting an inflection point that marks peak conditions for the labor market.
- The Philadelphia Fed survey fell to -3.3 in June (consensus 5.0) from 2.6 in May.
May Industrial Production (consensus 0.5%; prior 1.1%) and Capacity Utilization (consensus 79.3%; prior 79.0%) will be reported tomorrow at 9:15 ET.
- Dow Jones Industrial Average -17.6% YTD
- S&P 400 -22.5% YTD
- S&P 500 -23.1% YTD
- Russell 2000 -26.5% YTD
- Nasdaq Composite -32.0% YTD