Closing Market Summary: Stocks Tick Lower on ThursdayEquities ticked down on Thursday, sending the S&P 500 and the Nasdaq lower by 0.2% and 0.4%, respectively. However, the Dow (unch) managed to eke out yet another record close, its seventh in a row.
The energy sector tumbled 1.3% on Thursday in its worst one-day performance since July 6. Just about all energy components finished in negative territory with Dow component Chevron (CVX 109.43, -1.03) dropping 0.9%. Crude oil held a gain of around 0.7% in the morning session, but dropped sharply around midday. WTI crude settled lower by 0.7% at $49.26/bbl.
In total, seven of the eleven sectors settled in negative territory. The top-weighted technology (-0.4%) and financials (-0.5%) sectors struggled to keep pace with the broader market throughout the day. The lightly-weighted materials space (-0.7%) also exhibited relative weakness while the remaining laggards finished with losses of no more than 0.3%.
At the opposite end of the leaderboard, the health care (+0.2%), industrials (+0.5%), utilities (+0.4%), and telecom services (unch) groups finished with modest victories. Aetna (AET 158.54, +3.80) helped keep the health care group afloat, climbing 2.5% after beating both top and bottom line estimates and raising its guidance for the fiscal year.
Transports were among the top performers in the industrial sector, pushing the Dow Jones Transportation Average higher by 0.3%. Dow components General Electric (GE 25.76, +0.24) and 3M (MMM 207.62, +2.21) also outperformed, adding 0.9% and 1.1%, respectively.
Meanwhile, the rate-sensitive utilities group benefited from broad strength as a rally in the Treasury market left interest rates lower across the yield curve; the benchmark 10-yr yield dropped four basis points to 2.23% while the 2-yr yield slipped two basis points to 1.34%.
The Treasury market moved higher after the Bank of England voted 6-2 in favor of holding the key rate at 0.25% and lowered the UK's 2017 GDP growth forecast to 1.7% from 1.9%. The previous BoE meeting featured three calls for a rate hike, but, despite the slight change in voting, the Monetary Policy Committee noted that the key rate may need to rise more than the market currently expects.
In the currency market, the U.S. dollar climbed 0.6% against the British pound to 1.3144, but the U.S. Dollar Index (92.62, -0.13) still finished lower by 0.1% as the Japanese yen showed relative strength (109.99, -0.6%). The U.S. Dollar Index settled at a 15-month low.
Reviewing Thursday's economic data, which included the weekly Initial Claims Report, June Factory Orders, and the July ISM Services Index:
- The latest weekly initial jobless claims count totaled 240,000 while the consensus expected a reading of 242,000. Today's tally was below the revised prior week count of 245,000 (from 244,000). As for continuing claims, they increased to 1.968 million from the revised count of 1.965 million (from 1.964 million).
- The key takeaway from the report is that initial claims were in-line with their longstanding trend of signaling a tight labor market.
- The Factory Orders Report for June showed an increase of 3.0%, which is above the consensus of 2.9%. The May reading was revised to -0.3% (from -0.8%).
- The key takeaway from the report is that order activity outside the transportation sector was relatively weak in June. Nondefense capital goods orders, excluding aircraft -- a proxy for business spending -- were unchanged in June.
- The ISM Services Index for July declined to 53.9 from an unrevised reading of 57.4 in June. The consensus expected a reading of 56.9.
- The key takeaway from the report is that the non-manufacturing sector's expansion saw a notable deceleration in July, which isn't an uplifting consideration as it relates to the third quarter growth outlook. According to the ISM, the past relationship between the NMI and the overall economy indicates the NMI for July corresponds to a 1.9% increase in real GDP on an annualized basis.
On Friday, investors will receive the Employment Situation Report for July at 8:30 ET. Economists polled by expect the jobs report to show the addition of 181,000 nonfarm payrolls, an unemployment rate of 4.3%, and an increase of 0.3% in average hourly earnings.
The only other report on Friday's economic calendar is the June Trade Balance (consensus -$44.9 billion), which will also be released at 8:30 ET.
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