Closing Market Summary: Tech Shares Climb While Dow Jones Lags
The Nasdaq Composite (+0.5%) and S&P 500 (+0.2%) posted modest gains on Thursday, but not before enduring a morning dip into the red, which took place in reaction to reports indicating Russia has commenced military exercises on the Ukrainian border.
The news from Europe knocked the key indices from their early highs, while giving a boost to safe-haven assets like gold futures (+0.5% to $1290.80/ozt), Treasuries (10-yr yield -1 bps to 2.69%), and the Japanese yen (102.30 vs USD); however the morning spike in safety flows was retraced partially, while equities rallied off their lows with the technology sector (+1.1%) setting the pace.
Tech shares (and the Nasdaq) received significant support from the shares of
Apple (AAPL 567.77, +43.02), which surged 8.2% after the top-weighted tech company handily beat earnings expectations. In addition, Apple increased its share buyback to $90 billion and announced a 7:1 stock split, which will go into effect on June 2.
Apple notwithstanding, the market heard from several other tech names like
Citrix Systems (CTXS 60.00, +4.01),
Facebook (FB 60.87, -0.49),
F5 Networks (FFIV 105.98, -2.21), and
Texas Instruments (TXN 48.47, +2.01), all of which reported better than expected earnings.
Elsewhere, the discretionary sector (+0.5%) was the only other noteworthy pocket of strength, thanks to a boost from homebuilders.
DR Horton (DHI 23.13, +1.78) gained 8.3% after reporting above-consensus results, while the broader
iShares Dow Jones US Home Construction ETF (ITB 23.90, +0.57) advanced 2.4%. The discretionary space also received significant support from
Amazon.com (AMZN 337.15, +12.57), which rallied 3.9% ahead of its after-hours earnings release.
Even though two of the four largest sectors displayed relative strength, that was not the case with the other two top-weighed groups. Health care (-0.2%) and financials (-0.1%) lagged throughout the session, with the relative weakness in health care largely due to the underperformance of biotechnology. The
iShares Nasdaq Biotechnology ETF (IBB 229.62, -1.37) lost 0.6%, but managed to close above its 20-day moving average (228.55).
Also of note, the industrial sector (-0.2%) ended among the laggards after several components reported earnings.
3M (MMM 136.65, -1.34) and
UPS (UPS 98.64, -0.60) missed expectations, while
Caterpillar (CAT 105.28, +1.90) reported well ahead of estimates. For its part,
United Continental (UAL 41.53, -4.53) also beat bottom-line estimates, but slumped 9.8%.
Participation remained relatively light as less than 650 million shares changed hands at the NYSE.
Reviewing today's data:
- The initial claims level increased to 329,000 for the week ending April 19 from an upwardly revised 305,000 (from 304,000) for the week ending April 12. The consensus expected the claims level to increase to 312,000. A 24,000 increase from the previous week may seem like a lot, but it took place at a time when the Department of Labor normally has difficulty adjusting for the Easter holiday. In all likelihood, the low claims levels at the beginning of the month were a result of seasonal biases and not a change in layoff trends. Claims are likely to stabilize in the 320,000 -- 330,000 range over the next few weeks.
- Durable goods orders increased 2.6% in March after increasing a downwardly revised 2.1% (from 2.2%) in February. The consensus expected durable goods orders to increase 2.0%. For the past few months, durable goods orders have been reliant on Boeing for growth. That wasn't necessarily the case in March as demand strengthened across the board. Transportation orders were still important, up 4.0% after increasing 6.7% in February, but were not the sole provider of growth. Durable goods orders excluding transportation increased 2.0% in March, up from a 0.1% increase in February. That was also well above the consensus expectation of a 0.5% gain.
Tomorrow, the final reading of the Michigan Consumer Sentiment survey for April (consensus 82.6) will be released at 9:55 ET.
- S&P 500 +1.6% YTD
- Dow Jones Industrial Average -0.5% YTD
- Nasdaq Composite -0.7% YTD
- Russell 2000 -1.5% YTD