Closing Stock Market SummaryThe S&P 500 advanced 0.7% on Tuesday in a relatively broad-based advance led by energy sector (+4.5%). The Russell 2000 (+1.7%) outperformed, followed by the Nasdaq Composite (+1.0%) and Dow Jones Industrial Average (+0.6%).
The price action today signaled a continuation of the buy-the-dip mindset from yesterday afternoon, as investors latched onto the so-called recovery theme that benefits small-caps, cyclical sectors, and commodities (at the expense of the dollar). The better-than-expected ISM Manufacturing Index for December was cited as a positive catalyst.
Briefly, the manufacturing index rose to 60.7% in December (Briefing.com consensus 56.4%) from 57.5% in November for its seventh straight expansionary reading (50.0% or greater).
Energy stocks followed oil prices higher ($49.91/bbl, +2.32, +4.9%), which settled close to $50 per barrel. Most of the oil gains were notched before an OPEC+ decision to keep production levels steady in February, although Saudi Arabia later said it will cut an additional 1 million barrels/day in February and March.
The materials (+2.3%) and industrials (+1.0%) sectors were other cyclical outperformers, while the utilities (-0.1%) sector was the lone holdout.
Individual standouts included Apple (AAPL 131.01, +1.60, +1.2%), which had its price target raised to $150 from $145 at Canaccord Genuity, and Micron (MU 77.26, +3.21, +4.3%), which was upgraded to Buy from Sell at Citigroup.
Separately, broader conviction might have been restrained by a preference to wait for the outcome of the two Senate election runoffs in Georgia today, which will determine which party has majority control of the Senate. There was hope the results would be known by tomorrow morning.
Longer-dated Treasury yields rose amid increased selling interest as part of the recovery-minded trade today. The 2-yr yield finished flat at 0.12%, while the 10-yr yield increased four basis points to 0.96%. The U.S. Dollar Index decreased 0.4% to 89.51.
Reviewing Tuesday's economic data:
- The ISM Manufacturing Index rose to 60.7% in December (consensus 56.4%) from 57.5% in November. The dividing line between expansion and contraction is 50.0%, so the December reading reflects an acceleration in manufacturing activity.
- The key takeaway from the report is that the December increase puts the overall series just ten basis points below its high from 2018 (60.8%). The Employment Index (51.5%) returned into expansion after falling below 50.0% in October.
Looking ahead, investors will receive the ADP Employment Change Report for December, Factory Orders for November, the IHS Markit Services PMI for December, and the weekly MBA Mortgage Applications Index on Wednesday.
- Russell 2000 +0.2% YTD
- Nasdaq Composite -0.5% YTD
- Dow Jones Industrial Average -0.7% YTD
- S&P 500 -0.8% YTD