Closing Stock Market SummaryThe stock market had its reasons to decline today -- and that's what it did at the open. After that, however, it was mostly an upward, recovery march for the major indices which ended close to their highs for the session.
Retailer Target (TGT 156.05, -3.62, -2.3%) and railroad operator Union Pacific (UNP 228.71, +3.54, +1.6%) played a big part in driving the negative start. They both issued profit margin warnings, with the former blaming a need to clear excess inventory and the latter blaming cost inflation.
Their news came on top of a surprise decision by the Reserve Bank of Australia to raise its key lending rate by 50 basis to 0.85%, when only 25 basis points was expected, a report out of Germany showing weaker-than-expected factory orders for April, and news coverage highlighting national average gasoline prices hitting a record $4.92/gallon.
Soon after the opening bell, the Dow, Nasdaq, and S&P 500 were down 0.8%, 1.4%, and 1.0%, respectively. Just as quickly, though, they started to rebound as the CBOE Volatility Index rolled over and investors stepped in to buy on the initial weakness.
Notably, the CBOE Volatility Index hit 26.24 shortly before 10:00 a.m. ET. It trended lower the rest of the day, crossing at 23.98 as the stock market's closing bell rang. The drop-off in the so-called "fear gauge" coincided with a pickup in stocks, which were also helped by the following considerations:
- The S&P 500 holding above the May 27 low (4077.43) on its opening decline (today's low was 4080.19)
- A lack of follow-through selling pressure in Target, which was down nearly 10% in pre-market trading, and in Union Pacific, which was down nearly 4.0%
- The 10-yr note yield slipping back below 3.00% (-7 bps to 2.97%)
- Broad-based buying interest that benefited all sectors
Today's best-performing sector was the energy sector (+3.1%), which is now up 65.0% for the year. It enjoyed a 1.2% gain in WTI crude futures to $119.60/bbl and a big move by Exxon Mobil (XOM 103.37, +4.53, +4.6%), which was upgraded by Evercore ISI to Outperform from In-Line.
For most of the day, the energy sector was the only sector to gain at least 1.0%, but late buying interest helped the cause for a lot of sectors. The industrials (+1.4%), health care (+1.3%), information technology (+1.2%), and real estate (+1.2%) sectors all ended with gains in excess of 1.0%.
The only sector that didn't finish higher was the consumer discretionary sector (-0.4%), but even its loss felt like a gain given Target's warning, and considering the sector was down as much as 2.7% at its worst levels of the morning.
An advance-decline line that looked questionable at various points during today's session left no question by the end of the day that a bullish bias prevailed. Advancing issues led declining issues by an 11-to-5 margin at the NYSE and by nearly a 2-to-1 margin at the Nasdaq.
Reviewing today's economic data:
- The April trade deficit narrowed nicely to $87.1 billion (consensus -$89.6 billion) from an upwardly revised $107.7 billion (from -$109.8 billion), but it wasn't for the best of reasons.
- The key takeaway from the report is that imports dropped by $12.1 billion from March largely on account of supply chain bottlenecks driven by COVID-related lockdowns in China and presumably by less ordering from retailers facing an inventory glut.
- Consumer credit increased by $38.0 billion in April ( consensus $34.0 billion). The prior month saw a downward revision to $47.4 bln from $52.4 bln.
- The key takeaway from the report is that April marked another month of robust credit expansion, driven by hefty increases for both revolving and nonrevolving credit.
Looking ahead, market participants will receive the MBA's Weekly Mortgage Applications Index (7:00 a.m. ET), April Wholesale Inventories (10:00 a.m. ET), and the EIA's Weekly Crude Oil Inventories Report (10:30 a.m. ET) on Wednesday.
- Dow Jones industrial Average: -8.6% YTD
- S&P 400: -9.7% YTD
- S&P 500: -12.7% YTD
- Russell 2000: -14.5% YTD
- Nasdaq Composite: -22.2% YTD