Closing Market Summary: Stocks Climb Despite Dismal Q1 GDP Report
The stock market ended the Thursday session on an upbeat note despite receiving some disappointing data ahead of the open. The S&P 500 settled higher by 0.5% with nine sectors registering gains, while the Dow Jones Industrial Average (+0.4%) underperformed throughout the trading day.
Shortly before the open, the second revision to Q1 GDP revealed a 1.0% contraction, while the Briefing.com consensus expected a smaller decline of 0.5%. Interestingly, the subpar report led to just a brief stumble in the futures market, which recovered swiftly. That recovery may have been aided by today's initial claims report, which suggested the labor market remains on solid ground.
Even though almost all sectors finished in the green, there was no concerted leadership among the top-weighted sectors. Of the four largest groups, health care (+0.8%) and technology (+0.7%) displayed strength throughout the session, while consumer discretionary (+0.4%) and financials (+0.2%) joined the party in the late afternoon.
Most notably, the technology sector drew significant strength from the shares of Apple (AAPL 635.38, +11.37), which gained 1.8%. The largest tech stock extended its May advance to 7.7%, while also giving a major boost to the Nasdaq Composite. Interestingly, Apple's strength had little impact on the performance of other large cap tech names as Cisco Systems (CSCO 24.68, -0.14), Google (GOOG 560.08, -1.60), and Qualcomm (QCOM 80.19, -0.03) posted slim losses.
Elsewhere, the health care sector ended among the leaders even as biotechnology had a tough time keeping up with the sector. The iShares Nasdaq Biotechnology ETF (IBB 240.96, +1.37) added 0.6% versus a 0.8% gain for the countercyclical sector.
Staying on the countercyclical side, the consumer staples sector (+0.8%) benefitted from a broad rally, while ignoring below-consensus quarterly results from Costco (COST 114.14, -0.10). Shares of the wholesale retailer finished the session with a slim loss of just 0.1%.
Meanwhile, the other two defensive sectors—utilities (+0.1%) and telecom services (unch)—spent the entire session near their flat lines.
Like the two countercyclical sectors, Treasuries also settled in the neighborhood of their flat lines, but not before seeing intraday strength. Treasuries rallied through the first two hours of action, but spent the remainder of the day in a steady retreat. As a result, the 10-yr note slipped four ticks, sending the benchmark yield higher by one basis point to 2.46%.
Participation remained light as only 532 million shares changed hands at the floor of the New York Stock Exchange. In fact, the final tally represented the lowest volume of the year with the count coming in just below the previous 2014 low of 533.3 million that was registered on January 3.
Reviewing today's data:Tomorrow, Personal Income (consensus 0.3%), Personal Spending (consensus 0.2%), and Core PCE Prices (expected 0.2%) will all be released at 8:30 ET, while the Chicago PMI report for May (consensus 60.3) will cross the wires at 9:45 ET. The day's data will be topped off with the final reading of the May Michigan Consumer Sentiment Survey (expected 81.4), which will be released at 9:55 ET.
- First quarter GDP was revised down to -1.0% in the second estimate from a 0.1% gain in the advance estimate. GDP increased 2.6% in Q4 2013. The consensus expected GDP to be revised down to -0.5%. The revisions brought GDP down into negative territory for the first time since falling 1.3% in Q1 2011. Almost the entire revision was due to weaker inventory data. Inventory growth, which was down $24.30 billion from fourth quarter levels in the advance estimate, was revised to -$62.70 billion. That reduced GDP growth by an additional 1.1 percentage points (1.62 percentage points in total). Excluding inventories, real final sales were virtually unchanged in the second estimate, up 0.6% vs. a 0.7% gain in the advance estimate. Real final sales are still well below 2013 levels.
- The initial claims level fell to 300,000 for the week ending May 24 from a slightly upwardly revised 327,000 (from 326,000) for the week ending May 17. The consensus expected the initial claims level to fall to 318,000. Layoff levels are showing no signs of stability. After weeks of biases from likely seasonal adjustment problems, it looked like claims were stabilizing in the 320,000 to 330,000 range. However, over the past few weeks, claims have flirted with 300,000 a couple of times before retreating back toward 325,000.
- Pending home sales for April rose 0.4%, which was worse than the 1.0% increase forecast by the consensus. Today's reading followed last month's unrevised increase of 3.4%.
- S&P 500 +3.9% YTD
- Dow Jones Industrial Average +0.7% YTD
- Nasdaq Composite +1.7% YTD
- Russell 2000 -1.7% YTD