Closing Market Summary: Major Averages Rise Ahead of Brexit ResultsU.S. equity markets ended the Thursday affair broadly higher, discounting the probability of a "Leave" vote in today's Brexit referendum. Additional focal points impacting today's trade included support from the oil pit, softening in the dollar, and leadership from the heavily-weighted financial (+2.1%) and technology (+1.5%) sectors. The Nasdaq Composite (+1.6%) ended its day ahead of the S&P 500 (+1.3%) and the Dow Jones Industrial Average (+1.3%).
The major averages began the day on a higher note as investors weighed a rally in global bourses. European indices extended their recent winning streak as the final round of preliminary Brexit polls indicated that the "Remain" group held a lead over the "Leave" camp in today's highly anticipated Brexit vote. In response, investors adopted a risk-on posture while safe haven assets extended their recent losing streak.
The benchmark index gapped higher at the beginning of the session, climbing above technical and psychological resistance at the 2100 area. The S&P 500 (+1.3%) extended its opening advance in the early afternoon as the heavyweight financial (+2.1%) and technology (+1.5%) groups bolstered a move higher in the broader market. Additionally, WTI crude lifted the broader market as it finished higher by 2.0% ($50.12/bbl; +$1.00), extending its weekly gain to 4.4%.
The S&P 500 (+1.3%) extended its advance in the final hour of trade, finishing the day at a freshly minted session high (2113.32). All ten sectors finished in the green with the economically-sensitive financial (+2.1%) sector leading energy (+1.7%) and materials (+1.6%). The remaining cyclical sectors posted gains between 0.9% (consumer discretionary) and 1.5% (technology) while countercyclical utilities (+0.3%) ended at the bottom of the board.
The financial sector (+2.1%) rebounded alongside European banking names as the group responded to shifting expectations regarding the probability of a Brexit. On the home front, life insurance names and investment brokerages finished with the largest gains as Prudential (PRU 76.95, +2.92) and Charles Schwab (SCHW 29.69, +1.35) gained 3.9% and 4.8%, respectively. Meanwhile, Bank of America (BAC 14.04, +0.43) and Citigroup (C 44.46, +1.78) outperformed ahead of results from the latest supervisory stress tests. On a side note, the banking names will not receive approval to bolster their capital return programs until the Federal Reserve releases results from its Comprehensive Capital Analysis and Review after the close on June 29.
The PHLX Semiconductor Index (+2.6%) outperformed the broader technology space (+1.5%) as Micron (MU 14.05, +1.33) rallied 10.5%. The company benefited from upgrades to "Buy" and "Positive" at Nomura and Susquehanna, respectively. Elsewhere, software names outperformed with Adobe Systems (ADBE 96.21, +2.20) rebounding 2.3%. Conversely, Red Hat (RHT 78.39, -1.36) was under pressure after disappointing investors with its mixed outlook.
Biotechnology outperformed in the health care space (+1.3%), evidenced by the 2.2% gain in the iShares Nasdaq Biotechnology ETF (IBB 262.10, +5.54). The sub-group was likely benefiting from yesterday's positive ruling regarding Medicare spending. On the flipside, Humana (HUM 187.31, -0.36) lost 0.2% after the California Department of Insurance voiced concerns regarding the company's proposed merger with Aetna (AET 121.00, +0.84).
The U.S. Dollar Index (93.38, -0.34) ended lower as the greenback lost ground to the euro and the pound. The single currency gained 0.7% against the buck (1.1372) while the cable gained 1.2% (1.4891). Separately, the dollar climbed 1.5% against the yen (105.93) as safe haven assets remained pressured.
The Treasury complex retreated today as the yield on the 10-yr note rose five basis points to 1.74%.
Today's participation was below the recent average as fewer than 831 million shares changed hands on the NYSE floor
Today's economic data included weekly initial claims, New Home Sales for May, and Leading Indicators for May:
- Initial claims for the week ending June 18 fell by 18,000 from the prior week to 259,000 (consensus 273,000)
- The four-week moving average dipped by 2,250 to 267,000.
- There were no special factors influencing the initial claims reading, which held below 300,000 for the 68th straight week.
- Continuing claims for the week ending June 11 decreased by 20,000 to 2.142 million.
- With that reading, the four-week moving average for continuing claims decreased by 4,500 to 2.147 million.
- New home sales declined 6.0% month-over-month in May to a seasonally adjusted annual rate of 551,000 (consensus 560,000) from a downwardly revised 586,000 (from 619,000) in April.
- Despite the monthly sales drop, new home sales in May were 8.7% above the same period a year ago.
- The downturn in May featured a 33.3% decline in sales in the Northeast, although every region experienced a sales drop with the exception of the Midwest (+12.9%).
- Notably, the South and the West -- the two biggest regions for new home sales -- saw sales decline 0.9% and 15.6%, respectively.
- The median sales price of a new home increased 1.0% year-over-year to $290,400.
- With the slower sales pace in May, the inventory of new homes for sale jumped to a 5.3-month supply from 4.9 months in April.
- The Conference Board reported a 0.2% decline in its Leading Economic Index for May.
- That was well below the consensus estimate, which called for a 0.2% increase, and it followed on the heels of two consecutive monthly gains.
- In the six-month period ending May 2016, the leading economic index was flat after increasing 1.2% during the previous six months.
- The Conference Board added that the weakness among the leading indicators has become somewhat more widespread than the strengths in recent months.
- The decline in May was led by average weekly initial claims, which subtracted 0.23 percentage points, offsetting gains in six other components.
- The strongest of those gains was the interest rate spread, which added 0.16 percentage points to the index.
- The Conference Board estimated small positive contributions for manufacturers' new orders for:
- Consumers goods and materials (+0.01 percentage points) and nondefense capital goods orders excluding aircraft (+0.02 percentage points).
- Separately, the Coincident Index was unchanged in May while the Lagging Economic Index increased 0.3%.
Tomorrow's economic data includes Durable Orders for May (consensus -0.6%) and the final reading of Michigan Consumer Sentiment for May (consensus 94.0), which will cross the wires at 8:30 ET and 10:00 ET, respectively.
- S&P 500 +3.4% YTD
- Dow Jones +3.4% YTD
- Russell 2000 +3.0% YTD
- Nasdaq Composite -1.9% YTD