Closing Market Summary: Stocks Eke Out Slim Gains Despite Weakness in Energy
The major averages settled near the middle of their ranges after sliding from early highs. The S&P 500 gained a point while the Russell 2000 (-0.9%) underperformed throughout the trading day.
Equity indices started the day on an upbeat note with the S&P 500 rising into fresh record territory with help from three sectors that represent roughly 40% of the market. To that point, consumer discretionary (+0.6%), consumer staples (+0.5%), and technology (+0.6%) rallied at the start and displayed relative strength throughout the day.
However, the strength in the influential trio was not enough to keep the benchmark index near its high with the energy sector (-1.4%) acting as a big drag. The sector, and crude oil, spent the day in a steady retreat after China's Industrial Production growth slowed to 7.7% (expected 8.0%) and the ECB's Survey of Professional Forecasters lowered the region's 2014 harmonized inflation outlook to 0.5% from 0.7% and cut the 2015 forecast to 1.0% from 1.2%. Crude plunged 3.9% at $74.17/bbl after a daylong retreat that was capped with a $1.33 straight-line dive from the $75.50 level.
As for the energy sector, the group cut its loss in half in reaction to afternoon reports indicating Halliburton (HAL 53.79, +0.56) is in talks to buy Baker Hughes (BHI 58.75, +7.77). Baker Hughes surged 15.2%. The weakness in energy did not stop the Dow Jones Industrial Average (+0.2%) from registering a modest gain since the index contains just two members of the energy sector. Chevron (CVX 116.45, -1.20) and ExxonMobil (XOM 94.66, -0.72) lost 1.0% and 0.8%, respectively. Outside of the two names, Caterpillar (CAT 101.11, -1.88), which relies heavily on China, was the only other laggard of note within the Dow. Shares of CAT ended lower by 1.9%.
On the upside, the consumer discretionary sector received support from media names after the House Energy and Commerce Committee told the Federal Communications Commission that reclassifying the internet as a utility is outside of its authority. Time Warner Cable (TWC 141.05, +4.57) climbed 3.4% to underpin the sector after Comcast (CMCSA 54.30, +0.70) said its merger with TWC remains on track.
Meanwhile, the other consumer sector—staples—spent the day in the green thanks to a better than expected report from Wal-Mart (WMT 82.94, +3.74). The bottom-line beat overshadowed the company's guidance for flat comparable store sales in Q4.
Elsewhere, the technology sector advanced amid gains in top-weighted components. Apple (AAPL 112.82, +1.57), Intel (INTC 33.68, +0.30), and Microsoft (MSFT 49.61, +0.83) added between 0.9% and 1.7% while Cisco Systems (CSCO 25.68, +0.57) jumped 2.3% after beating earnings estimates on light guidance.
Treasuries climbed throughout the day, but backed away from highs into the close. The 10-yr yield fell three basis points to 2.35%.
Participation was a bit below long-term average as 690 million shares changed hands at the NYSE floor.
Economic data included Initial Claims, JOLTs, and the Treasury Budget:Tomorrow, the Retail Sales report for October (consensus 0.3%) and October Import/Export Prices will be released at 8:30 ET while the preliminary reading of the November Michigan Sentiment Index (consensus 87.5) and the September Business Inventories report (expected 0.2%) will cross the wires at 9:55 ET and 10:00 ET, respectively.
- The initial claims level increased to 290,000 from an unrevised 278,000 while the consensus expected an increase to 280,000
- The Department of Labor said there were no special factors influencing the report
- The Job Openings and Labor Turnover Survey for September indicated job opening decreased to 4.735 million from 4.853 million
- The Treasury Budget for October showed a deficit of $121.70 billion, which followed the prior deficit of $90.60 billion while the consensus expected the deficit to hit $122.00 billion
- Nasdaq Composite +12.1% YTD
- S&P 500 +10.3% YTD
- Dow Jones Industrial Average +6.5% YTD
- Russell 2000 +1.1% YTD