Closing Market Summary: Stocks Begin Trading Week on Quiet Note
The stock market kicked off the new trading week on a sleepy note as the major averages spent the bulk of the session near their flat lines. However, a final push during the last hour of action placed the key indices at new highs into the close. The S&P 500 added 0.2%, while the Russell 2000 (-0.1%) lagged throughout the day.
Equities began the session on their lows as renewed global growth concerns, combined with continued worries about Ukraine, conspired to ensure a cautious start. In China, the HSBC Manufacturing PMI fell to 48.1 from 48.3 (expected 48.4), signifying a slowdown in manufacturing activities. Elsewhere, the European Commission warned about slower-than-expected growth by lowering its 2014 inflation forecast to 0.8%. The commission also trimmed next year's inflation forecast to 1.2%, while lowering its 2015 GDP forecast to 1.7% from 1.8%.
Strikingly, the worries that pressured index futures overnight were cast aside once the opening bell rang. The major averages returned to their flat lines during the first 90 minutes of action, but were unable to continue their rally as financials (-0.4%) acted as a wet blanket.
The second-largest sector finished the day at the bottom of the leaderboard as JPMorgan Chase (JPM 54.22, -1.36) weighed after guiding for a 20.0% year-over-year decline in Q2 markets revenue. Shares of JPM fell 2.5%, while peers Bank of America (BAC 15.08, -0.17) and Citigroup (C 47.18, -0.55) both lost near 1.2%.
Meanwhile, the remaining top-weighed sectors finished on a mixed note. Health care (+0.6%) and technology (+0.4%) outperformed, while the discretionary sector (+0.1%) lagged.
Retailers contributed to the underperformance of the discretionary space, with Target (TGT 59.87, -2.14) falling 3.5% after announcing Chief Executive Officer Gregg Steinhafel will step down from his post. Homebuilders also factored into the relative weakness of the discretionary sector after investor Jeffrey Gundlach recommended shorting the housing sector at the Ira Sohn conference. The iShares Dow Jones US Home Construction ETF (ITB 23.66, -0.29) lost 1.2%.
Elsewhere, the two commodity-related sectors—energy (+0.5%) and materials (+0.5%)—finished among the leaders. The energy space rallied even as crude oil shed 0.4% to $99.46/bbl, while producers of basic materials drew strength from miners. The Market Vectors Gold Miners ETF (GDX 24.41, +0.09) gained 0.4%, while gold futures climbed 0.5% to $1309.60/ozt.
On the fixed income side, Treasuries finished in the red after sliding from their overnight highs. The benchmark 10-yr yield rose two basis points to 2.61%.
Participation was well below average with less than 600 million shares changing hands at the NYSE.
Economic data was limited to just one report:
* The ISM Non-manufacturing Index increased to 55.2 in April from 53.1 in March. That was the strongest reading since August 2013, while the Briefing.com consensus expected the index to increase to 54.0. Business activities/production levels improved to 60.9 in April from 53.4 in March. The increase in production was predicated on a large increase in new orders (58.2 from 53.4). There is some concern that production may not be sustainable without another influx of new orders growth. Order backlogs slipped into a contraction in April (49.0 from 51.5). The Employment Index fell to 51.3 in April from 53.6 in March, which was unusual considering the April Employment Situation Report showcased a large increase in payrolls that month.
Tomorrow, the Trade Balance for March (Briefing.com consensus -$42.50 billion) will be released at 8:30 ET.
* S&P 500 +2.0% YTD * Dow Jones Industrial Average -0.3% YTD * Nasdaq Composite -0.9% YTD * Russell 2000 -3.0% YTD