Closing Stock Market Summary
The stock market saw somewhat mixed action today, but the Dow, Nasdaq, and S&P 500 all managed to recover from larger losses seen earlier in the day.
Like recent sessions, uncertainty related to the Israel-Hamas war and worries about the House attempting to elect a new Speaker were overshadowed today by other factors, namely economic data and earnings news.
The S&P 500 finished flat and the Nasdaq Composite declined 0.3%, weighed down by underperforming growth and mega cap stocks. The Russell 2000 climbed 1.1% and the S&P Mid Cap 400 rose 1.2%.
Market breadth was positive with advancers leading decliners by a 4-to-3 margin at the NYSE and at 5-to-3 margin at the Nasdaq.
The relative strength in smaller cap stocks and the relative weakness in larger cap stocks was a reaction to this morning's stronger-than-expected September Retail Sales Report. Total retail sales were up 0.7% month-over-month following an upwardly revised 0.8% increase (from 0.6%) in August, and retail sales, excluding autos, were up 0.6% month-over-month following an upwardly revised 0.9% increase (from 0.6%) in August.
That report fueled increased selling in Treasuries, but also bolstered small cap and mid cap stocks, many of which have a primarily domestic orientation, due to the positive economic implications of the report. The 2-yr note yield climbed 11 basis points to 5.20%. The 10-yr note yield hit 4.86% at its high, but settled at 4.85%, which is 14 basis points higher than yesterday.
Stocks were able to rally off session lows as the 10-yr note yield pulled back from its intraday high just before 10:00 a.m. ET, but things rolled over as the 10-yr yield climbed again in afternoon trading. The S&P 500 hit 4,393 at its best level, but its rebound effort stalled there, which was just below the 50-day moving average (4,399).
The Vanguard Mega Cap Growth ETF (MGK) declined 0.3% while the Invesco S&P 500 Equal Weight ETF (RSP) logged a 0.5% gain. NVIDIA (NVDA 439.38, -21.57, -4.7%) was an influential laggard after news that the Biden administration will put more restrictions on China's ability to purchase advanced semiconductors, according to The Wall Street Journal. NVDA indicated that it is not expecting any meaningful impact from the new China rules.
Most of the S&P 500 sectors registered a gain led by materials (+1.0%) and energy (+1.0%). The information technology sector (-0.8%) saw the biggest decline.
Additionally, Bank of America (BAC 27.62, +0.63, +2.3%), Goldman Sachs (GS 309.36, -5.03, -1.6%), Lockheed Martin (LMT 441.13, +0.72, +0.2%), and Johnson & Johnson (JNJ 156.09, -1.44, -0.9%) all reported better than expected earnings, but closed with mixed results.
- Nasdaq Composite: +29.3% YTD
- S&P 500: +13.9% YTD
- Dow Jones Industrial Average: +2.6% YTD
- S&P Midcap 400: +3.3% YTD
- Russell 2000: +0.3% YTD
Reviewing today's economic data:
- Total retail sales increased 0.7% month-over-month in September ( consensus 0.3%) following an upwardly revised 0.8% increase (from 0.6%) in August. Excluding autos, retail sales jumped 0.6% month-over-month ( consensus 0.2%) following an upwardly revised 09% increase (from 0.6%) in August. The strength wasn't just because of higher gasoline prices either. Excluding gasoline stations, retail sales were up 0.7%.
- The key takeaway from the report is that it doesn't reflect a consumer who is shying away from spending. That understanding should translate favorably into Q3 GDP forecasts, and less favorably in forecasts pertaining to the Fed's policy view.
- Total industrial production increased 0.3% month-over-month in September ( consensus 0.0%) following a downwardly revised unchanged (from 0.4%) in August. The capacity utilization rate jumped to 79.7% ( consensus 79.5%) from a downwardly revised 79.5% (from 79.7%) in August. Total industrial production was up 0.1% yr/yr. The capacity utilization rate of 79.7% was in-line with its long-run average.
- The key takeaway from the report is that manufacturing output continues to be soft. Notwithstanding the monthly gain in September, manufacturing output was down 0.8% year-over-year and is apt to remain under added pressure as the UAW strike at the Big Three automakers drags on.
- The NAHB Housing Market Index dropped to 40.0 in October ( consensus 45.0) following a revised 44 in September (from 45).
- Business inventories increased by 0.4% in August (consensus 0.3%) following a revised 0.1% increase in July (from 0.0%).
Wednesday's economic calendar features:
- 7:00 ET: Weekly MBA Mortgage Index (prior 0.6%)
- 8:30 ET: September Housing Starts (consensus 1.380 mln; prior 1.283 mln) and Building Permits (consensus 1.448 mln; prior 1.543 mln)
- 10:30 ET: Weekly crude oil inventories (prior 10.18 mln)
- 14:00 ET: October Fed Beige Book