Closing Stock Market Summary
The major indices had a choppy session, ultimately finishing near their best levels of the day. The price action in an oversold Treasury market provided an excuse for an oversold stock market to rebound.
The 2-yr note yield settled at 5.09%, which is five basis points lower than yesterday's settlement, after hitting 5.17% overnight. The 10-yr note yield settled at 4.74%, down seven basis points from yesterday's settlement, after hitting 4.88% overnight.
Mega cap performance was integral to index level moves today. The Vanguard Mega Cap Growth ETF (MGK) closed up 1.5% while the market-cap weighted S&P 500 gained 0.8%. Apple (AAPL 173.66, +1.26, +0.7%) for its part logged a gain despite a downgrade to Sector Weight from Overweight at KeyBanc Capital Markets.
Semiconductor and growth stocks acted as additional support for the broader market. The PHLX Semiconductor Index rose 1.4% and the Russell 3000 Growth Index closed 1.3% higher.
Still, many other stocks came along for the bounce, evidenced by a 0.6% gain in the Invesco S&P 500 Equal Weight ETF (RSP). Nine of the 11 S&P 500 sectors registered gains. The consumer discretionary (+2.0%), communication services (+1.3%), and information technology (+1.3%) sectors, which all house mega-cap constituents, closed at the top of the leaderboard.
The energy sector (-3.4%), meanwhile, logged the biggest decline as oil prices dropped 5.2% to $84.70/bbl. That decline was attributed to concerns about weakening demand in a slower growth environment influenced by higher interest rates.
Separately, there was a cloud of political uncertainty hanging over the market after the House voted 216-210 in an unprecedented action to remove Kevin McCarthy as Speaker of the House. This is likely to complicate the negotiations to avoid another government shutdown after November 17 since business in the House will be stalled until a new Speaker is elected. Nonetheless, that cloud of uncertainty did not rain on today's rebound parade.
This morning's release of the ADP Employment Change Report showed weaker-than-expected job growth in September and the ISM Services PMI showed a modest deceleration in the pace of expansion versus August, but August factory orders came in much stronger than expected, rebounding smartly from a decline in July.
- Nasdaq Composite: +26.5% YTD
- S&P 500: +11.1% YTD
- S&P Midcap 400: +0.4% YTD
- Dow Jones Industrial Average: -0.1% YTD
- Russell 2000: -1.8% YTD
Reviewing today's economic data:
- The ADP Employment Change report indicated that private payrolls grew by 89,000 in September ( consensus 150,000) following a revised increase of 180,000 in August (from 177,000)
- The weekly MBA Mortgage Applications Index fell 6.0% with purchase applications declining 6.0% and refinance applications plunging 7.0%
- The ISM Services PMI decreased to 53.6% in September (consensus 53.7%) from 54.5% in August. The dividing line between expansion and contraction is 50.0%, so the September reading connotes an expansion in services sector activity, but at a slightly slower pace than August. September marked the ninth consecutive month of growth for the services sector.
- The key takeaway from the report is that the largest sector of the U.S. economy remains in growth mode, paced by ongoing growth in new order activity and employment, and still defying any hard-landing views.
- Factory orders surged 1.2% month-over-month in August (consensus 0.3%) following an unrevised 2.1% decline in July. Excluding transportation, factory orders increased 1.4% month-over-month on the heels of a 0.9% increase in July. Shipments of manufactured goods jumped 1.3% month-over-month after increasing 0.7% in July.
- The key takeaway from the report is that factory orders, down in July, rebounded smartly in August, which is not indicative of an economy losing its growth momentum in a convincing way.
- The weekly EIA crude oil inventories showed a draw of 2.22 million barrels following last week's draw of 2.17 million barrels.
Thursday's economic calendar includes:
- 08:30 ET: Weekly Initial Claims (consensus 225,000; prior 204,000) and Continuing Claims (prior 1.670 mln); August Trade Balance (consensus -$65.1 bln; prior -$65.0 bln)
- 10:30 ET: Weekly natural gas inventories (prior +90 bcf)