Closing Stock Market Summary
Today's trade featured a lack of conviction among buyers. The Dow Jones Industrial Average closed with a slim gain while the S&P 500, Nasdaq Composite, and Russell 2000 declined 0.3%, 0.9%, and 1.0%, respectively.
Apple (AAPL 177.56, -5.35, -2.9%) registered another sizable decline, which hung over the broader market. The ongoing weakness followed a Bloomberg report that China is aiming to broaden its iPhone ban to state and federal agencies. That sent semiconductor stocks lower as well, leading to a 2.0% loss in the PHLX Semiconductor Index.
The news goes beyond Apple and the semiconductor stocks, however. The worry for the market is that, if China purposely chooses to make business difficult for a company like Apple, which has a good and important working relationship in China, then it can do so for a lot of other U.S. companies doing business in China. Interestingly, these restrictions come at a time when The Wall Street Journal reported that Huawei has introduced a new smartphone to compete with Apple.
The S&P 500 information technology sector (-1.6%) saw the largest decline, weighed down by Apple and its semiconductor components. The utilities sector (+1.3%) closed at the top of the leaderboard.
Market participants were focused on action in the Treasury market, which was turbulent today. Yields drifted lower after China reported an 8.8% year-over-year decline in exports and a 7.3% year-over-year decline in imports for August. Rates turned noticeably higher at 8:30 a.m. ET, however, when it was learned that initial jobless claims for the week ending September 2 were just 216,000 -- the lowest since February -- and that Q2 productivity was revised lower (to 3.5% from 3.7%) while unit labor costs were revised higher (to 2.2% from 1.6%).
The combined takeaway from these reports is that they would likely leave the Fed convinced that the policy rate needs to be kept higher for longer. The Treasury market settled down following the initial burst of selling interest after the U.S. data, and as it did, the early selling pressure on stocks relented.
The 2-yr note yield, at 4.99% just before the release, hit 5.05% in the immediate aftermath but settled at 4.96%. The 10-yr note yield was at 4.27% before the data, hit 4.31% immediately after, but settled at 4.26%.
WTI crude oil futures fell 0.7% to $86.97/bbl, breaking a nine-day winning streak.
Nasdaq Composite: +31.4% YTD
S&P 500: +15.9% YTD
S&P Midcap 400: +6.0% YTD
Russell 2000: +5.4% YTD
Dow Jones Industrial Average: +4.1% YTD
Reviewing today's economic data:
Weekly Initial Claims 216K (consensus 233K); Prior was revised to 229K from 228K; Weekly Continuing Claims 1.679 mln; Prior was revised to 1.719 mln from 1.725 mln
The key takeaway from the report is that initial claims -- a leading indicator -- were at their lowest level since February. That is really good news -- economically speaking -- but it is also news -- monetary policy speaking -- that will likely keep the Fed in a restrictive policy position for longer.
Q2 Productivity - Rev. 3.5% (consensus 3.7%); Prior 3.7%; Q2 Unit Labor Costs - Rev. 2.2% (consensus 1.6%); Prior 1.6%
The key takeaway from the report is that unit labor costs weren't as low as previously reported, so they look disappointing at the headline level; however, they still fit the bill of disinflation given that unit labor costs were up 2.5% a year ago.
Friday's economic calendar features:
10:00 ET: July Wholesale Inventories ( consensus -0.1%; prior -0.5%)
15:00 ET: July Consumer Credit ( consensus $15.8 bln; prior $17.9 bln)