Closing Market Summary: Upbeat Finish to Disappointing WeekWall Street wrapped up a disappointing week on a positive note on Friday, in what was a quiet and fairly range-bound session. The S&P 500 advanced 0.2%, breaking a four-session losing streak, while the Dow and the small-cap Russell 2000 added 0.3% and 0.6%, respectively. The tech-heavy Nasdaq underperformed, closing a tick higher.
Gains were modest, but broad, with nine of eleven S&P sectors closing in the green. The energy group (+1.0%) was the top performer, benefiting from a jump in the price of crude oil; WTI crude futures rallied 2.0% to $62.35 per barrel. Conversely, the top-weighted technology sector (-0.1%) finished at the bottom of the leaderboard.
The technology group struggled for much of the session, keeping the broader market's gain in check, with Broadcom (AVGO 254.87, -12.89) showing particular weakness; the chipmaker dropped 4.8% even though it beat quarterly profit estimates. Tech-giant Alphabet (GOOGL 1134.42, -16.19) also struggled, losing 1.4%, but Adobe Systems (ADBE 225.55, +6.68) bucked the trend, rallying 3.1% after beating both earnings and revenue estimates for its fiscal first quarter.
Overseas, equity indices in the Asia-Pacific region ended Friday broadly lower, with Japan's Nikkei losing 0.6%, while the major bourses in Europe finished with gains of around 0.3% apiece. The U.S. dollar climbed 0.2% against the euro to 1.2287, but dropped 0.2% against the yen to 106.08.
In the bond market, U.S. Treasuries closed the week on a lower note, sending yields higher across the curve. The benchmark 10-yr yield climbed two basis points to 2.84%, while the 2-yr yield ticked up one basis point to 2.29%, which is its highest level since September 2008.
The relative weakness in the 10-yr note steepened the yield curve a bit, pushing the 10-2 spread to 55 basis points. This steepening helped underpin the financial sector (+0.2%) on Friday, but a decline in shares of Wells Fargo (WFC 55.90, -0.93) weighed on the group, leaving it roughly in line with the broader market. WFC shares lost 1.6% following a Wall Street Journal report that a federal investigation into the bank's sales practices now includes its wealth-management unit.
Investors received several pieces of economic data on Friday, including February Housing Starts and Building Permits, February Industrial Production and Capacity Utilization, the preliminary reading of the University of Michigan Consumer Sentiment Index for March, and the Job Openings and Labor Turnover Survey for January:
- Housing starts decreased to a seasonally adjusted annualized rate of 1.236 million units in February (consensus 1.283 million), down from a revised 1.329 million units in January (from 1.326 million). Building permits decreased to a seasonally adjusted 1.298 million in February (consensus 1.330 million) from a revised 1.377 million in January (from 1.396 million).
- Starts and permits were weaker than expected, yet the key takeaway is that there was some underlying detail in the report that helped offset the headline misses, namely the increase in single-family starts and the uptick in the number of units under construction.
- Industrial Production increased 1.1% in February (consensus +0.3%), while the January reading was revised to -0.3% (from -0.1%). Meanwhile, Capacity Utilization ticked up to 78.1% (consensus 77.7%) from a revised reading of 77.4% in January (from 77.5%).
- The key takeaway from the report is twofold: (1) manufacturing output was a core driver of the increase in industrial production and (2) capacity utilization hit its highest rate since January 2015, which will keep inflation expectations alive in the market narrative.
- The preliminary reading of the University of Michigan Consumer Sentiment Index for March rose to 102.0 (consensus 99.5) from 99.7 in February.
- The key takeaway from the report is that the gain in the Sentiment Index was driven entirely by households with incomes in the bottom third. Another notable takeaway is that near-term inflation expectations increased to their highest level in several years.
- The January Job Openings and Labor Turnover Survey showed that job openings increased to 6.312 million from a revised 5.667 million (from 5.811 million) in December.
On Monday, investors will not receive any economic data.
- Nasdaq Composite: +8.4% YTD
- S&P 500: +2.9% YTD
- Dow Jones Industrial Average: +0.9% YTD
- Russell 2000: +3.3% YTD