Closing Market Summary: Stocks Finished Mixed on ThursdayEquities got off to a good start on Thursday, but most gains were unwound during an afternoon sell off in which technology stocks suffered the heaviest losses. The Nasdaq (-0.6%) and the Russell 2000 (-0.6%) finished behind the benchmark S&P 500 (-0.1%). Meanwhile, the Dow (+0.4%) advanced to a new record high, largely thanks to the outperformance of four companies--Verizon (VZ 47.81, 3.41), Boeing (BA 241.00, +7.55), Merck (MRK 63.69, +1.89), and Walt Disney (DIS 110.00, +3.06). A late-afternoon uptick left the indices in the middle of their trading ranges.
The top-weighted technology sector (-0.8%) exhibited relative strength in the morning session as Facebook (FB 170.44, +4.83) surged to a new record high in reaction to its better than expected earnings and revenues. However, tech stocks began to sell off sharply in the early afternoon, sending the technology group, and the tech-heavy Nasdaq, deep into negative territory.
Facebook managed to settle with a solid gain of 2.9%, but fellow mega-cap names like Apple (AAPL 150.56, -2.90), Microsoft (MSFT 73.16, -0.89), and Alphabet (GOOGL 952.51, -12.80) were hit hard, dropping between 1.2% and 1.9%. Chipmakers also faced heavy selling pressure, sending the PHLX Semiconductor Index lower by 1.6%.
Amazon (AMZN 1046.00, -6.80) held a big gain of around 2.9% before the afternoon sell off, but slipped into the red alongside the broader market as investors divested some of their shares ahead of the company's earnings report, which crossed the wires following Thursday's closing bell. AMZN settled Thursday's session with a loss of 0.7%.
In total, six of the eleven sectors settled in the red with losses ranging from 0.1% to 0.8%. Outside of technology, health care was the worst-performing sector, dropping 0.7% amid broad weakness. The heavily-weighted financial space (-0.5%) also underperformed, as did the industrial group (-0.5%), which was led lower by transport names.
The Dow Jones Transportation Average plunged 3.1% on Thursday as just about every one of its 30 components settled with notable losses. Southwest Airlines (LUV 56.57, -2.95) and UPS (UPS 107.79, -4.50) were among the weakest components, dropping 5.0% and 4.0%, respectively, despite both companies reporting better than expected earnings.
However, on the upside, the lightly-weighted telecom services group rallied for the second day in a row, adding 5.2% to increase its two-day advance to 8.3%. Verizon (VZ 47.81, +3.41) led the charge, surging 7.7%, after reporting better than expected revenues. The wireless giant added 614,000 monthly subscribers in Q2--soundly beating consensus estimates that called for around 70,000 additions--thanks in part to the company's new unlimited data plan, which it launched back in February.
Elsewhere on the earnings front, Procter & Gamble (PG 90.68, +1.38) jumped 1.6% after reporting better than expected earnings and issuing upbeat guidance. The company's solid performance helped the consumer staples space (+0.9%) finish solidly ahead of the broader market, alongside the consumer discretionary (+0.7%) and energy (+1.0%) groups. The utilities space (+0.2%) also settled in the green.
In Washington, the GOP announced that its long-awaited tax reform plan will not include a border-adjustment tax. The SPDR S&P Retail ETF (XRT 41.37, +0.56) moved sharply higher following the announcement, ending the day with a gain of 1.4%, as retailers depend heavily on the free flow of goods from overseas, where much of their products are manufactured.
U.S. Treasuries moved lower in a curve-steepening trade following a stronger than expected reading for June Durable Orders (6.5% actual vs 2.9% consensus). The benchmark 10-yr yield climbed two basis points to 2.31%.
Also of note, crude oil rose 2.4% to $49.05/bbl, the U.S. Dollar Index (93.76, +0.47) added 0.5%, gold rallied 0.8% to $1,259.90/ozt, and the CBOE Volatility Index (VIX 10.24, +0.64) climbed 6.7%.
Reviewing Thursday's economic data, which included June Durable Orders, the weekly Initial Claims Report, and June International Trade in Goods:
- June durable goods orders rose 6.5%, which is above the 2.9% increase expected by the consensus. The prior month's reading was revised to -0.1% (from -1.1%). Excluding transportation, durable orders increased 0.2% (consensus 0.5%) to follow the prior month's revised uptick of 0.6% (from 0.1%).
- The key takeaway from the report is that orders for nondefense capital goods excluding aircraft -- a proxy for business investment -- were down 0.1%. Shipments of those same goods, though, were up 0.2% on the heels of a 0.4% increase in May, which will be a positive input for Q2 GDP forecasts.
- The latest weekly initial jobless claims count totaled 244,000 while the consensus expected a reading of 240,000. Today's tally was above the revised prior week count of 234,000 (from 233,000). As for continuing claims, they declined to 1.964 million from the unrevised count of 1.977 million.
- The key takeaway from the report is that it's more of the same on the initial claims front, which portends good news most likely for nonfarm payroll increases.
- The Advance report for International Trade in Goods for June showed a deficit of $63.9 billion, down from a revised deficit of $66.3 billion for May (from -$65.9 billion).
On Friday, investors will receive the advance estimate for second-quarter GDP (consensus 2.8%) and the final reading of the University of Michigan Consumer Sentiment Index for July (consensus 93.1). The two reports will cross the wires at 8:30 ET and 10:00 ET, respectively.
- Nasdaq Composite +18.6% YTD
- S&P 500 +10.6% YTD
- Dow Jones Industrial Average +10.3% YTD
- Russell 2000 +5.6% YTD