The S&P 500 began the first full week of 2015 with a slide below its 50-day moving average (2045) and found itself fighting that level once again on Friday. The benchmark index settled just below the 50-day average, losing 0.8% to lock in a 0.6% decline for the week while the Nasdaq (-0.7%) outperformed slightly, falling 0.5% for the week.
Friday's affair was a bit of a roller coaster with the first downswing coming in the early morning hours when futures retreated in reaction to a Bloomberg report indicating the European Central Bank remains unsure of a format for its QE program. The news rattled U.S. futures and markets in Europe considering a QE announcement in two weeks was all but priced in.
The early morning slip was followed by a swift recovery of the losses when the December Nonfarm Payrolls report beat expectations (252K; consensus 245K) on the headline level. The resulting rebound rally was short-lived, fading as soon as the cash market opened and, we would contend, as soon as participants finished reading the report.
Specifically, the lack of payroll growth took the shine off what would have been a decent report. Hourly wages declined 0.2% and November growth was slashed in half (to +0.2% from +0.4%). Once the realization that without payroll growth there can be no consumption growth sank in, equities retreated. In addition to pressuring stocks, dimming growth prospects weighed on crude oil ($48.40/bbl, -$0.41) while boosting Treasuries. The benchmark 10-yr yield fell four basis points to 1.97% after bouncing off the 1.95% level.
Cyclical sectors bore the brunt of today's losses with four of six growth-oriented groups ending in-line with or behind the broader market. Notably, the implications stemming from the absence of wage growth kept financials (-1.3%) and consumer discretionary shares (-1.1%) behind the broader market throughout the session.
The financial sector finished at the bottom of the barrel while the discretionary sector ended just above with retailers fueling the weakness. The
SPDR S&P Retail ETF (XRT 95.25, -1.74) lost 1.8%. However, the widespread selling in retail stocks masked the relative strength among homebuilders. The
iShares Dow Jones US Home Construction ETF (ITB 26.61, +0.07) gained 0.3%.
Elsewhere among cyclical sectors, industrials (-1.1%) finished among the laggards while energy (-0.8%), materials (-0.5%), and technology (-0.3%) outperformed.
The relative strength of the technology sector prevented the S&P 500 from revisiting its morning low. Several large cap names like
Apple (AAPL 112.01, +0.12),
Cisco Systems (CSCO 27.79, +0.28),
IBM (IBM 159.11, +0.69), and
Oracle (ORCL 43.39, -0.02) held their own while chipmakers eked out gains with the PHLX Semiconductor Index adding 0.1%.
Similar to chipmakers, the high-beta biotechnology group spent the day ahead of the broader market. The
iShares Nasdaq Biotechnology ETF (IBB 313.32, -1.12) shed 0.4%, helping the Nasdaq Composite finish a bit ahead of the broader market.
Although biotechnology was able to underpin the Nasdaq, the group failed to lift the health care sector (-0.8%) ahead of the broader market as large cap components weighed.
Outside of healthcare, the remaining countercyclical groups ended near the broader market with consumer staples, telecom services, and utilities losing between 0.7% and 0.8%.
Today's participation was below average with roughly 713 million shares changing hands at the NYSE floor.
Economic data included Nonfarm Payrolls and Wholesale Inventories:
-
Nonfarm payrolls increased by 252,000 in December after adding an upwardly revised 353,000 (from 321,000) in November while the consensus expected an increase of 245,000
- The unemployment rate fell to 5.6% in December from 5.8% in November (consensus 5.7%), but that resulted from a large decline in labor force
- Average hourly wages in December contracted 0.2% after increasing a downwardly revised 0.2% (from 0.4%) in November
-
Wholesale inventories increased 0.8% in November after increasing an upwardly revised 0.6% (from 0.4%) in October while the consensus expected an increase of 0.3%
- Durable wholesale inventories increased 0.8% in November, up from a 0.1% increase in October. Large gains in professional equipment (1.3%), machinery (0.9%), and automotive (0.6%) offset declines in lumber (-0.5%) and furniture (-0.3%)
- Nondurable wholesale inventories increased 0.7% in November, down from a 1.5% increase in October. Low oil prices pushed petroleum inventories down 3.7%. That loss was more-than-offset by a 5.7% increase in farm product inventories
Monday's session will be free of economic data.
- Dow Jones Industrial Average -0.5% YTD
- S&P 500 -0.7% YTD
- Nasdaq Composite -0.7% YTD
- Russell 2000 -1.6% YTD