The major U.S. indices closed the week on a mixed note as a sector rotation trade pitted the top-weighted technology sector (-2.7%) against the financials (+1.9%) and energy (+2.5%) groups. The tech-heavy Nasdaq (-1.8%) finished solidly lower while the S&P 500 (-0.1%) settled just a tick below its unchanged mark. Meanwhile, the Dow and the Russell 2000 outperformed, adding 0.4% apiece. For the week, the S&P 500 declined 0.3%.
Some of 2017's top-performers thus far, including Apple (AAPL 148.98, -6.01), Microsoft (MSFT 70.32, -1.63), Amazon (AMZN 978.31, -31.96), Alphabet (GOOGL 970.12, -34.16), and Facebook (FB 149.63, -5.08), fell to heavy selling pressure on Friday, posting losses between 2.3% and 3.9%. Chipmakers made matters even worse, evidenced by the 4.3% decline in the PHLX Semiconductor Index, with NVIDIA (NVDA 149.60, -10.34) showing relative weakness (-6.5%). Needless to say, the top-weighted technology group (-2.7%), which houses five of the six aforementioned companies, also settled solidly lower.
Typically, the stock market wouldn't have had a chance to overcome a 2.7% decline in the technology sector. However, the financials and energy groups, which have lagged thus far in 2017, kept losses in check with big gains of 1.9% and 2.5%, respectively. Their outperformance, when pitted against the stark underperformance of the information technology sector, makes it pretty evident that a sector rotation trade was in play.
The health care sector also put together a solid showing, adding 0.6%, with pharmaceutical names like Pfizer (PFE 32.77, +1.02) and Merck (MRK 64.39, +1.19) leading the advance; the two companies added 3.2% and 1.9%, respectively. Likewise, the lightly-weighted materials (+1.3%) and telecom services (+0.9%) groups outperformed while the remaining advancers--industrials and real estate--finished with gains of 0.4% apiece.
On the flip side, the consumer discretionary sector (-0.4%) underperformed as Amazon's tumble easily outweighed a positive performance from retailers. Like the energy and financial sectors, the SPDR S&P Retail ETF (XRT 41.04, +0.58) moved higher today, adding 1.4%, despite having struggling throughout the year. The consumer staples (-0.1%) and utilities (unch) spaces also finished in the red, but settled roughly in line with the broader market.
In Europe, UK Prime Minister Theresa May's Conservative Party unexpectedly lost its parliamentary majority in yesterday's snap election, reducing its seats to 318 from 331. The British pound (1.2735) dropped noticeably following the results, retreating 1.7% against the U.S. dollar, but European indices took the news in stride; the UK's FTSE jumped 1.0% while Germany's DAX and France's CAC added 0.8% and 0.7%, respectively.
Despite today's slip on Wall Street, safe-have assets experienced modest selling pressure. Gold dropped 0.6% to $1,272.50/ozt and U.S. Treasuries finished lower across the yield curve with the benchmark 10-yr yield climbing two basis points to 2.21%.
On the data front, investors received only one economic report--April Wholesale Inventories--on Friday:
- April Wholesale Inventories decreased 0.5% (consensus -0.1%). The prior month's reading was revised to 0.1% from 0.2%.
- The market doesn't typically pay much attention to this release since the full business inventories report is usually released a short time later.
Investors will not receive any economic data on Monday.
- Nasdaq Composite +15.3% YTD
- S&P 500 +8.6% YTD
- Dow Jones Industrial Average +7.6% YTD
- Russell 2000 +4.8% YTD
Closing Market Summary: Rotation Trade Leaves Averages Mixed