Closing Market Summary: Dow and S&P at 2016 Highs as Oil RalliesThe S&P 500 ended its day higher by 0.3% after the index tested, but could not make a sustained move above the 2100 level. Today's trade featured weaker than expected housing data, an uptick in oil, mixed quarterly earnings reports, and, as a result, split performances between heavily-weighted financials (+1.1%) and technology (-0.9%). The Nasdaq Composite (-0.4%) ended its day behind the S&P 500 (+0.3%) and the Dow Jones Industrial Average (+0.3%).
Equity indices opened their day higher as global bourses exhibited increased risk appetite overnight. Japan's Nikkei (+3.7%) showed the largest uptick as commentary from Bank of Japan Governor Haruhiko Kuroda prompted speculation for future stimulus. At the same time, oil rebounded following yesterday's post-Doha meeting decline.
However, the major averages pulled back from their session highs as the heavily-weighted health care (+0.3%) space pulled away from its initial 0.9% gain. This pullback also corresponded with a downturn in the broader market after the benchmark hit a session high at 2104 and backed away from that level into the close.
By the end of the session, eight sectors finished above their flat lines as commodity-sensitive energy (+1.9%) and materials (+2.1%) led financials (+1.1%) and telecom services (+0.8%). Conversely, heavily-weighted technology (-0.6%) and consumer discretionary (-0.5%) ended with the largest losses.
The energy space (+1.9%) moved higher with oil as WTI crude finished its day higher by 2.8% at $42.34/bbl. The energy component has benefited from reports out of Kuwait that its oil and gas workers strike has extended into its third day. Meanwhile, the sector looks ahead to tonight's weekly API data. The inventory data is expected to show that crude stockpiles rose by 1.60 million barrels, compared to last week's build of 6.22 million barrels.
The economically-sensitive financial sector (+1.1%) extended its April gain to 3.6% as money center banks and investment brokerages moved higher in sympathy with Goldman Sachs (GS 161.65, +3.63). The company reported a bottom-line beat and light revenue for the first quarter. Meanwhile, Goldman Sachs also disclosed that revenue declined 40.3% on year-over-year basis. However, the stock recovered from a 1.3% loss to end higher by 2.3%. To be fair though, money center banks and investment brokerages are also likely benefiting from an uptick in oil, in light of their exposure to oil and gas assets.
In the technology space (-0.6%), Alphabet (GOOGL 776.25, -11.43) fell 1.5% after headlines indicated that that the European Union is scheduled to file an antitrust suit against the tech name regarding required applications on Android devices. Meanwhile, Dow component IBM (IBM 144.00, -8.53) was the worst performer in the price-weighted index after issuing below-consensus guidance for the second quarter. Additionally, IBM did beat top and bottom-line estimates for the quarter, but revenue fell 4.6% year-over-year.
Biotechnology underperformed in the health care space (+0.3%), evidenced by the 1.9% decline in the iShares Nasdaq Biotechnology ETF (IBB 279.53, -5.44). Conversely, Dow component UnitedHealth (UNH 130.50, +2.69) was the best component in the price-weighted index. The company gained 2.1% after beating bottom-line estimates and raising its full year earnings guidance to $7.75-7.95 per share from $7.60-$7.80 per share.
The PHLX Semiconductor Index (-1.2%) displayed relative weakness ahead of Intel's (INTC 31.60, -0.05) quarterly report this evening. Meanwhile, Skyworks (SWKS 72.23, -2.51) and Qorvo (QRVO 45.24, -1.92) lost a respective 3.4% and 4.1% after being downgraded from "Strong Buy" to "Outperform" at Raymond James.
The U.S. Dollar Index (94.06, -0.43) finished its day off its low as the greenback made up some ground against the euro and the Canadian dollar. The dollar/Canadian dollar pair ended at 1.2659 (-1.0%) while the euro finished higher by 0.4% (1.1362).
The Treasury complex ended its day lower with the yield on the 10-yr note rising two basis points to 1.79%.
Today's participation was above the recent average as more than 877 million shares changed hands on the NYSE floor.
Today's economic data included March Building Permits and Housing Starts:
- The Housing Starts and Building Permits report for March was definitely a disappointment. Starts fell 8.8% from the prior month to a seasonally adjusted 1.089 million units (consensus 1.17 million).
- The weakness in starts was presumably due to some of the typical Spring building getting pulled forward during the warmer-than-usual winter months. To be sure, there is always an excuse for everything in a trending market.
- The downturn was paced by a 9.2% slide in single-family starts, which saw declines in all regions: Midwest (-21.2%), West (-9.1%), Northeast (-8.6%), and the South (-4.9%). Multi-unit starts were down 7.9%.
- Building permits, meanwhile, declined 7.7% to 1.086 million (consensus 1.200 million).
- Building permits are a leading indicator, so the March data is not an encouraging sign for future building activity. Only the South (+1.8%) saw a pickup in permits for single-family units.
- The one positive in the report is that the number of homes under construction jumped to 990,000 from 985,000 in February. That will be a positive input in first quarter GDP forecasts as the first quarter average of 984,000 was above the fourth quarter average of 962,000.
Tomorrow's economic data will be limited to the weekly MBA Mortgage Index and March Existing Home Sales (consensus 5.30 million), which will cross the wires at 7:00 ET and 10:30 ET, respectively.
- Dow Jones +3.6% YTD
- S&P 500 +2.8% YTD
- Russell 2000 +0.4% YTD
- Nasdaq -1.2% YTD