Closing Stock Market SummaryShortly after the opening bell, today's trade had the looks of another downtrend day for the stock market. The main indices bounced off their early lows, however, after buyers stepped in when the S&P 500 breached the 3,800 level.
The upside bias was supported by some speculative buying interest due to the market being oversold on a short-term basis. At their lows this morning, the Nasdaq Composite and S&P 500 were down 9.7% and 7.5%, respectively, from their highs a week ago. When taking into account the scope of recent losses, though, today's gains still had a tenuous feel and were decidedly modest in size.
Most of the outsized price action today was seen in the bond and currency markets. The 2-yr Treasury note yield settled at 4.27% after hitting 4.30% overnight. The 10-yr note yield rose ten basis points to 3.68% after hitting 3.71% overnight. The U.S. Dollar Index fell 0.7% to 103.97 with USD/JPY -3.8% to 131.69.
These moves followed a surprise announcement from the Bank of Japan (BOJ) that it will allow the 10-yr JGB yield to move +/- 50 basis points from 0.00% versus its prior band of +/- 25 basis points as part of an effort "to improve market functioning." Separately, the BOJ maintained its benchmark rate at -0.1%, as expected.
Market participants also had to digest some disappointing economic data released this morning. The focal point was an 11.2% month-over-month decline in November building permits (a leading indicator) to a seasonally adjusted annual rate of 1.342 million (Briefing.com consensus 1.480 million). Single-unit permits were flat to down in every region.
Still, buyers were not scared away entirely today and market breadth skewed somewhat positive. Advancers led decliners by a roughly 11-to-10 margin at both the NYSE and the Nasdaq.
The majority of the 11 S&P 500 sectors closed the session with a gain, although only one -- energy (+1.5%) -- ended more than 1.0% higher. That sector drew some added support from rising oil prices ($76.02/bbl, +0.55, +0.7%). Meanwhile, the consumer discretionary sector (-1.1%) suffered the steepest loss by a wide margin due to ongoing weakness in Tesla (TSLA 137.80, -12.07, -8.1%).
Many mega cap stocks had a volatile session and played an influential role in driving the meandering price action for the three main indices. The Vanguard Mega Cap Growth (MGK) closed flat versus a 0.1% gain in both the S&P 500 and Invesco S&P 500 Equal Weight ETF (RSP).
Notably, small and mid cap stocks performed better than their larger peers today. The Russell 2000 (+0.5%) and S&P Mid Cap 400 (+0.5%) were among the "biggest" winners for the main indices, albeit still registering modest gains.
- Dow Jones Industrial Average: -9.6% YTD
- S&P Midcap 400: -15.5% YTD
- S&P 500: -19.8% YTD
- Russell 2000: -22.2% YTD
- Nasdaq Composite: -32.6% YTD
Reviewing today's economic data:
- Total housing starts declined 0.5% month-over-month to a seasonally adjusted annual rate of 1.427 million units (consensus 1.395 million), yet single-unit starts fell by 4.1% to 828,000. Total building permits declined 11.2% month-over-month to a seasonally adjusted annual rate of 1.342 million (consensus 1.480 million), with permits for single-unit dwellings dropping by 7.1%.
- The key takeaway from the report is the weakness in building permits, which are a leading indicator. There wasn't growth in any region of the country for single units. That speaks to the waning confidence among homebuilders who recognize the affordability constraints for prospective buyers due to building cost inflation and much higher mortgage rates.
Looking ahead to Wednesday, market participants will receive the following economic data:
- 7:00 a.m. ET: Weekly MBA Mortgage Applications Index (prior +3.2%)
- 8:30 a.m. ET: Q3 Current Account Balance (consensus -$224.0B; prior -$251.1B)
- 10:00 a.m. ET: December Consumer Confidence consensus 101.0; prior 100.2)
- 10:00 a.m. ET: November Existing Home Sales ( consensus 4.20M; prior 4.43M)
- 10:30 a.m. ET: Weekly EIA Crude Oil Inventories (prior +10.23M)