Closing Market Summary: Stocks End Strong Week on Cautious Note
The stock market finished an upbeat week on a cautious note after a
late-morning headline interrupted an extension of this week's rally.
Despite the intraday weakness, the major averages were able to climb off
their lows into the close. The S&P 500 settled right below its flat line
with six sectors ending in the green. The benchmark index posted a 1.2%
gain for the week while the Nasdaq outperformed. The tech-heavy index
added 0.3% to extend this week's advance to 2.2%.
Like yesterday, equities climbed out of the gate with biotechnology
claiming the lead at the start of the session. However, the advance was
halted after the spokesman for Ukraine's National Security and Defense
Council said the country's army destroyed a part of an armed convoy from
Russia. The news sent U.S. and European equity indices to lows, while
boosting German Bunds, U.S. Treasuries, and the yen.
Notably, Germany's Bunds finished on their highs with the 10-yr yield down
seven basis points at 0.95%. Similarly, the U.S. 10-yr note rallied in
reaction to the news from Ukraine, but surrendered a portion of its gain
during afternoon action. The benchmark yield fell six basis points to
2.34% to register its lowest close since mid-June of last year.
One could argue that the market was ripe for some profit taking after a
run that saw the S&P 500 log four gains over the past five sessions.
Similarly, European equities were forced to give back a portion of their
gains from this week.
Six sectors registered losses with telecom services (-0.4%) finishing at
the bottom of the leaderboard. Meanwhile, heavily-weighted consumer
discretionary (-0.1%), financials (-0.4%), and industrials (-0.3%) also
ended among the laggards, which prevented the S&P 500 from returning into
the green.
However, the Nasdaq Composite was able to claw its way back into positive
territory with help from biotechnology and chipmakers. The iShares Nasdaq
Biotechnology ETF (IBB 263.41, +2.21) added 0.9% to end the week higher by
4.7%. Microchip manufacturers also contributed to the outperformance of
the Nasdaq with the PHLX Semiconductor Index climbing 1.0%. Applied
Materials (AMAT 22.48, +1.33) was a standout, surging 6.3% after reporting
a one-cent beat. For its part, the technology sector (+0.1%) ended little
changed.
Also of note, the energy space (+0.5%) finished in the lead, rebounding
from this week's underperformance. The sector trimmed its weekly loss to
0.5%, while crude oil jumped 1.9% to $97.31/bbl. Despite the advance, the
energy component shed 0.3% during the week.
After registering the lowest NYSE floor volume of the year yesterday,
today's participation was boosted by options expiration. As a result, more
than 740 million shares changed hands at the NYSE.
Economic data included the PPI report, Empire Manufacturing survey, Net
Long-Term TIC Flows, Industrial Production, Capacity Utilization, and the
preliminary reading of the Michigan Sentiment survey:
* Producer prices increased 0.1% in July after increasing 0.4% in June,
while the consensus expected an increase of 0.2%
* As expected, energy prices declined in July, falling 0.6%
* Excluding food and energy, core PPI rose 0.2% for a second
consecutive month, as expected by the consensus
* The Empire Manufacturing Survey for August registered a reading of
14.7, which was below the prior month's reading of 25.6
* The consensus expected a decline to 15.5
* The June net long-term TIC flows report showed an $18.70 billion
outflow of foreign capital from U.S.-denominated assets to follow last
month's inflow of $19.40 billion
* Industrial production increased 0.4% in July after an upwardly revised
0.4% (from 0.2%) gain in June, while the consensus
expected an increase of 0.3%
* Capacity utilization hit 79.2%, as expected by the consensus
* The University of Michigan Consumer Sentiment Index fell to 79.2 in
the August preliminary reading from 81.8 in July, while the
consensus expected an increase to 81.7
On Monday, the NAHB Housing Market Index for August will be released at
10:00 ET.
* Nasdaq Composite +6.9% YTD
* S&P 500 +5.8% YTD
* Dow Jones Industrial Average +0.5% YTD
* Russell 2000 -2.0% YTD