Closing Stock Market SummaryThe S&P 500 declined 0.2% on Friday, as the continued rise in long-term interest rates pressured many of the growth stocks, whose losses overshadowed the strong gains in the cyclical stocks.
The Nasdaq Composite (+0.1%) and Dow Jones Industrial Average (unch) closed little changed, with the Dow setting an all-time high early in the session. The Russell 2000 outperformed with a noteworthy 2.2% gain amid strength in small-cap financial and energy stocks.
Notably, the yield on the 10-yr Treasury note rose another six basis points to 1.35% amid a pro-cyclical news cycle that supported continued selling in longer-dated maturities. To name a few, Treasury Secretary Yellen reiterated the "think big" approach to stimulus, reports suggested that the U.S. will double its vaccine supply in the coming weeks, and earnings/economic data continued to beat expectations.
The S&P 500 materials (+1.9%), energy (+1.6%), industrials (+1.6%), and financials (+1.2%) sectors took the news in stride, with Deere (DE 330.00, +29.75, +9.9%) providing an additional boost for the industrials sector following its positive earnings report. DE shares climbed 10% to fresh all-time highs.
The Philadelphia Semiconductor Index (+2.4%) was another area of strength, as chipmakers rallied around strong quarterly results and guidance from Applied Materials (AMAT 119.46, +6.03, +5.3%).
The market, however, was restrained by influential declines in the information technology (-0.2%), communication services (-1.1%), and consumer discretionary (-0.9%) sectors amid valuation-oriented weakness in their mega-cap growth components. The Vanguard Mega Cap Growth ETF (MGK 211.63, -1.74, -0.8%) declined 0.8%.
The utilities (-1.5%), consumer staples (-1.2%), and health care (-1.2%) sectors also dragged on performance.
The 2-yr yield increased one basis point to 0.11%. The U.S. Dollar Index decreased 0.2% to 90.37. WTI crude futures pulled back 2.1%, or $1.27, to $59.15/bbl.
Reviewing Friday's economic data:
- Existing home sales increased 0.6% m/m in January to a seasonally adjusted annual rate of 6.69 million (consensus 6.56 million) from a downwardly revised 6.65 million (from 6.76 million) in December. Total sales in January were up 23.7% from a year ago.
- The key takeaway from the report is that the supply of existing homes for sale is at an all-time low. That is going to be a pressure point that feeds higher prices, limits total sales potential, and creates affordability pressures that will increase with rising mortgage rates.
- The IHS flash Markit Manufacturing PMI checked in at 58.5 vs. 59.2 in December; the flash Services PMI checked in at 58.9 vs. 58.3 in December.
Looking ahead, investors will receive the Conference Board's Leading Economic Index (LEI) for January on Monday.
- Russell 2000 +14.8% YTD
- Nasdaq Composite +7.7% YTD
- S&P 500 +14.8% YTD
- Dow Jones Industrial Average +2.9% YTD