Closing Market Summary: Stocks Recover Opening Losses While Yuan Remains Active
The stock market ended the Wednesday session on a slightly higher note despite showing considerable weakness at the start of the trading day. The S&P 500 added 0.1% while the Nasdaq Composite (+0.2%) settled just ahead.
Equity indices faced selling pressure at the start after the overnight session featured another move to devalue China's yuan. Specifically, the People's Bank of China fixed the yuan 1.6% lower and then stepped in to support the currency late in the session. Following the intervention, the USD/CNY pair ended higher by 1.0% at 6.3870 while the continued tinkering with the exchange rate by the PBoC fueled a continuation of Tuesday's risk-off move across global markets.
The selling pressure persisted until the end of the European session with major equity indices across the old continent losing between 1.4% and 3.4%. Regional markets notched their session lows not long before the close, after Germany's Bild reported that the German government views the third Greek bailout package as insufficient. This was a noteworthy shift, considering just yesterday the market had believed the bailout agreement was all but complete. The eurogroup will attempt to extinguish the latest fire during a Friday meeting in Brussels.
Once equity markets in Europe closed, U.S. indices rallied steadily off their lows with the S&P 500 swiftly returning above its 200-day moving average (2,075). Thanks to the intraday recovery, seven sectors registered gains while three groups finished in the red, but above their early lows.
Most notably, the financial sector (-0.9%) finished well behind the broader market amid growing expectations the Fed may be inclined to delay its first rate hike past September due to the recent actions undertaken by the People's Bank of China. Sector heavyweights like Bank of America (BAC 17.52, -0.27), Citigroup (C 56.91, -0.73), and JPMorgan Chase (JPM 67.24, -0.99) narrowed their losses by the close, but still surrendered between 1.3% and 1.5%.
Another clue that suggested the market may be shifting its rate-hike expectations was the weakness in the Dollar Index (96.24, -0.99), which fell 1.0%, returning to levels last seen in mid-July. On a related note, Treasuries surged overnight, but retreated throughout the day, ending with slight gains. As a result, the benchmark 10-yr yield slipped one basis point to 2.13% after testing the 2.05% level in early morning action.
Outside of financials, consumer discretionary (-0.4%) and telecom services (-0.5%) ended in the red with retailers pressuring the discretionary sector, evidenced by a 0.5% slide in SPDR S&P Retail ETF (XRT 96.35, -0.51). On the earnings front, Fossil (FOSL 60.67, -1.44) lost 2.3% after missing revenue estimates and guiding fiscal-year 2015 earnings below analyst expectations.
On the upside, the energy sector (+1.9%) led the rebound while crude oil endured a volatile session, but settled higher by 0.3% at $43.23/bbl and continued climbing during electronic trading.
Elsewhere among cyclical sectors, technology (+0.5%) was largely responsible for the intraday rebound as the sector rallied behind Apple (AAPL 115.24, +1.75). The largest stock by market cap plunged 5.5% yesterday and opened lower by 3.5% today, but climbed to settle with a gain of 1.5%. In other tech names, there was plenty of strength among high-beta chipmakers with the PHLX Semiconductor Index climbing 0.6%. Cree (CREE 26.59, +1.39) was among the leaders, spiking 5.5% despite missing earnings estimates and reporting revenue in-line with its warning from June.
Similar to chipmakers, the high-beta biotech group outperformed during afternoon action, which contributed to the rebound. The iShares Nasdaq Biotechnology ETF (IBB 370.16, +2.99) climbed 0.8% while the broader health care sector tacked on 0.1%.
Today's session invited the strongest trading volume of the week with more than 910 million shares changing hands at the NYSE floor.
On the economic front, the June Job Openings and Labor Turnover Survey showed a decrease in openings to 5.249 million from 5.357 million while the Treasury Budget statement for June showed a deficit of $149.20 billion (consensus -$149.00 billion).
Tomorrow, weekly Initial Claims (consensus 271K), July Retail Sales (consensus 0.5%), and July Import/Export Prices will be reported at 8:30 ET while the June Business Inventories report (expected 0.3%) will be released at 10:00 ET.
- Nasdaq Composite +6.1% YTD
- S&P 500 +1.3% YTD
- Russell 2000 +0.3% YTD
- Dow Jones Industrial Average -2.4% YTD