Closing Market Summary: Russell 2000 Jumps While Blue Chips Lag
The major averages registered their second consecutive advance on Thursday
with the Russell 2000 ending in the lead. The small cap index advanced
1.0%, while the S&P 500 gained 0.2% with eight sectors finishing in the
green. For its part, the Dow Jones Industrial Average (+0.1%)
underperformed throughout the session as blue chip listings struggled to
stay out of negative territory.
The Russell 2000 displayed some volatility this week, but thanks to
today's advance, the index will enter the Friday session with a weekly
gain of 1.1%. Furthermore, the index will begin tomorrow's affair within
five points of its 200-day moving average (1118), which has been
presenting a challenge in recent days.
Today, the index rallied out of the gate, which served as an encouraging
early signal. The S&P 500, meanwhile, dipped below its flat line at the
open, but once that dip was bought, the benchmark index rallied into the
afternoon.
Overall, countercyclical sectors fared a bit better than their
growth-sensitive peers. Of the four defensively-oriented groups, the
consumer staples space (-0.2%) was the lone laggard, while health care
(+0.5%), telecom services (+0.5%), and utilities (+0.8%) outperformed.
Notably, the health care sector was boosted by biotechnology, which in
turn rallied in sympathy with small cap stocks. The iShares Nasdaq
Biotechnology ETF (IBB 234.15, +4.41) jumped 1.9% to regain its 50-day
moving average after falling below that level in late March.
Biotechnology also factored into the outperformance of the Nasdaq
Composite (+0.6%), while the traditional tech sector (+0.1%) could not
keep pace as top-weighted components displayed relative weakness. The
sector slumped from its high during the final 30 minutes of action after
Hewlett-Packard's (HPQ 31.78, -0.74) earnings, which were scheduled for an
after-hours release, leaked. Shares of HPQ tumbled 2.3% in reaction to a
top-line miss on in-line earnings.
Outside of technology, the remaining cyclical groups finished in mixed
fashion as consumer discretionary (+0.5%) and financials (+0.4%)
outperformed, while energy (-0.2%), industrials (+0.2%), and materials
(+0.2%) lagged.
Treasuries settled near their lows after retreating throughout the
session. The 10-yr note shed six ticks with its yield climbing two basis
points to 2.55%.
Participation has been lacking throughout the week with the Memorial Day
weekend on the horizon. Prior to today, Monday's volume (573 million)
represented the second-lowest total of the year, but today's session
claimed that ‘honor' as 565 million shares changed hands at the NYSE.
Economic data featured weekly initial claims, the Existing Home Sales
report for April, and April Leading Indicators:
* Weekly initial claims increased from 298,000 to 326,000, while the
consensus expected a reading of 305,000. In all
likelihood, last week's sharp drop was an aberration rather than a
change in labor market conditions, considering levels quickly returned
into the 320,000-330,000 range.
* Existing home sales increased a modest 1.3% to 4.65 million SAAR in
April from 4.59 million SAAR in March. The gain ended three
consecutive months of sales declines. The consensus
expected existing home sales to increase to 4.66 million. The increase
in sales coincided with improvements in mortgage applications and a
gain in the pending home sales index. Still, sales are down 6.8% from
April 2013. Sales fell 1% in the Midwest and were flat in the
Northeast. Gains of 4.9% and 1.0% were seen out West and in the
South.
* The Leading Indicators report for April increased 0.4%. That followed
a revised 1.0% increase in March, and was below the Briefing.com
consensus estimate, which called for an increase of 0.5%.
Tomorrow, the New Home Sales report for April will be released at 10:00
ET.
* S&P 500 +2.4% YTD
* Dow Jones Industrial Average -0.2% YTD
* Nasdaq Composite -0.5% YTD
* Russell 2000 -4.0% YTD