Closing Stock Market SummaryThe S&P 500 finished little changed on Tuesday, as gains in cyclical stocks helped offset losses in growth stocks and health care names. The Russell 2000 (+1.7%) extended its hot start to the year and closed at a fresh record high, while the Dow Jones Industrial Average (+0.2%) and Nasdaq Composite (+0.3%) posted smaller gains.
Investors remained committed to the so-called recovery trade, which meant that small-caps, cyclical stocks, oil prices ($53.20/bbl, +1.01, +1.9%), and longer-dated Treasury yields were up on expectations for improved economic growth. Hopes that the vaccine rollout in the U.S. could soon speed up was cited as a positive factor.
The energy sector (+3.5%) set the winning pace with a 3.5% gain in a continuation of its recent outperformance. The materials (+1.4%), consumer discretionary (+1.3%), financials (+1.1%), and industrials (+1.0%) sectors advanced at least 1.0%. In addition, advancing issues outpaced declining issues by healthy margins at the NYSE and Nasdaq.
The downside was that growth stocks were pressured by the continued rise in long-term interest rates since their high valuations have been largely supported by extremely low rates. The 10-yr yield peaked at 1.18% amid increased selling interest, but it finished one basis point higher at 1.14% after a $38 billion 10-yr note government auction was met with strong demand.
The S&P 500 information technology sector (-0.4%), which is home to many growth stocks, pared losses as Treasury yields started to come off session highs. The communication services (-1.5%) and health care (-1.1%) sectors closed near session lows.
Separately, the financial and energy sectors received additional support from positive-minded analyst recommendations in stocks like Wells Fargo (WFC 33.94, +0.70, +2.1%), Charles Schwab (SCHW 61.20, +0.95, +1.6%), Chevron (CVX 93.34, +1.74, +1.9%), and Occidental Petroleum (OXY 22.62, +2.54, +12.7%).
The 2-yr yield decreased one basis point to 0.14%. The U.S. Dollar Index fell 0.5% to 90.04 amid relative strength in the euro and British pound.
Reviewing Tuesday's economic data:
- Job openings decreased slightly to 6.527 million in November from 6.652 million in October.
- The NFIB Small Business Optimism Index decreased to 95.9 in December from 101.4 in November.
Looking ahead, investors will receive the Consumer Price Index for December, the Treasury Budget for December, the Fed's Beige Book for January, and the weekly MBA Mortgage Applications Index on Wednesday.
- Russell 2000 +7.8% YTD
- Dow Jones Industrial Average +1.5% YTD
- Nasdaq Composite +1.4% YTD
- S&P 500 +1.2% YTD