Closing Market Summary: Small Caps Lag While Blue Chips Display Relative Strength
The stock market ended the Thursday session on a defensive note despite showing early strength. The S&P 500 lost 0.1%, while the tech-heavy Nasdaq (-0.4%) fell nearly 60 points from its session high. Also of note, the Russell 2000 (-1.0%) settled below its 200-day moving average after failing to retake that level during the session.
Today's affair proved to be a bit of a rollercoaster ride as equities grinded higher in the morning, but rolled to fresh lows during the afternoon before climbing off those lows into the close. Fittingly, the areas that fueled the early advance (biotechnology and high-growth names) were the same spots that paced the afternoon slide.
Equity indices climbed through the first 90 minutes of action with the four top-weighted sectors setting the pace. Consumer discretionary (+0.3%), financials (+0.2%), and technology (+0.1%) continued their outperformance throughout the session, while the health care sector (-0.5%) swung from a position of relative strength to that of weakness when biotechnology reversed from its session high. The iShares Nasdaq Biotechnology ETF (IBB 223.35, -4.13) lost 1.8%, ending just above its 200-day moving average (223.00) after being up as much as 1.6% during the first half of action.
Elsewhere, momentum names like Facebook (FB 56.76, -0.63), FireEye (FEYE 27.45, -1.20), LinkedIn (LNKD 145.07, +1.70), and yelp (YELP 53.29, +0.55) gave an early boost to the technology sector before sliding into the close. Facebook and FireEye ended lower, while LinkedIn and Yelp gave up a good portion of their early gains. Similarly, consumer discretionary components Netflix (NFLX 321.66, +1.12) and Priceline.com (PCLN 1108.00 -23.74) also slumped from their intraday highs. Shares of Priceline.com could not stay out of the red as the company's cautious guidance overshadowed its earnings beat.
Staying on the momentum/earnings theme, Tesla (TSLA 178.59, -22.76) tumbled 11.3% following its quarterly report that featured a bottom-line beat on deliveries that were on the low end of analyst estimates.
Once again, the underperformance of high-beta names took place against the backdrop of relative strength among blue chip issues. The price-weighted
Dow Jones Industrial Average eked out a modest gain of 0.2%, narrowing its week-to-date advance to 0.2% versus a 2.7% drop for the Russell 2000 since last Friday.
Even though equities did not display weakness until the afternoon, the foreign exchange market was signaling caution for the better part of the day. Specifically, the Japanese yen surged to a session high less than an hour after the New York open and continued inching higher into the afternoon. The dollar/yen pair dove into the 101.55 area, ending the session just above yesterday's low of 101.44.
Similarly, Treasuries jumped to highs in the morning, but fell from those levels in reaction to a dismal 30-yr auction that saw a below-average bid/cover ratio of 2.09x (12-auction average 2.39x). Despite the early-afternoon dive, the 10-yr note ended in the green, adding one tick with its yield at 2.61%.
The intraday reversal did not invite unusually strong participation as less than 700 million shares changed hands at the NYSE.
Economic data was limited to just one report:
* The initial claims level fell to 319,000 for the week ending May 3 from an upwardly revised 345,000 (from 344,000) for the week ending April 26. The consensus expected the initial claims level to fall to 325,000. As expected, the recent volatility surrounding the
Easter holiday period is coming to an end. Initial claims are likely to stabilize between 320,000 and 330,000 as labor conditions improve moderately. The continuing claims level fell to 2.685 mln for the week ending April 26 from a downwardly revised 2.761 mln (from 2.771 mln) for the week ending April 19, while the consensus expected a decline to 2.750 mln.
Tomorrow, the Wholesale Inventories report for March and the March Jobs Openings and Labor Turnover Survey will both be released at 10:00 ET.
* S&P 500 +1.5% YTD * Dow Jones Industrial Average -0.2% YTD * Nasdaq Composite -3.0% YTD * Russell 2000 -5.5% YTD