Closing Market Summary: Small Caps Lead Stocks Higher
The stock market kicked off the new trading week on an upbeat note with small caps leading the advance after showing relative weakness last week. The Russell 2000 surged 2.3%, while the S&P 500 gained 1.0%. Even though the benchmark index posted a slimmer gain than the Russell 2000, it still managed to register a fresh closing record high at 1,896.65. Similarly, the Dow Jones Industrial Average (+0.7%) also settled at a new record high.
Small caps faced some heavy selling last week, while indices with a significant concentration of large cap listings were able to withstand the pressure. Today, however, the areas that struggled last week displayed relative strength, while the Dow and S&P 500 posted more modest gains.
Eight of ten sectors finished in the green with a clear bias towards cyclical groups as consumer discretionary (+1.3%), financials (+1.0%), industrials (+1.5%), materials (+1.3%), and technology (+1.5%) all posted gains of 1.0% or more, while the energy sector (+0.6%) was the only laggard among cyclical sectors.
The largest S&P 500 sector—technology—finished in the lead thanks to a boost from high-growth names like Facebook (FB 59.83, +2.59), LinkedIn (LNKD 152.28, +3.59), and Yelp (YELP 56.60, +2.38); however, it is worth pointing out that other areas of the sector also had a strong showing. Top sector members Apple (AAPL 592.83, +7.29) and Microsoft (MSFT 39.97, +0.43) both gained near 1.1%, while the broad strength among chipmakers sent the PHLX Semiconductor Index higher by 1.8%.
Elsewhere, the discretionary sector also received a measure of support from momentum names, but retailers and homebuilders were not far behind. The SPDR S&P Retail ETF (XRT 84.88, +1.62) and iShares Dow Jones US Home Construction ETF (ITB 23.70, +0.49) posted gains close to 2.0% apiece.
With nearly all cyclical sectors finishing ahead of the broader market, the only soft spots were found on the countercyclical side. The health care sector (+1.0%) ended ahead of the broader market, while consumer staples (+0.1%), telecom services (-0.2%), and utilities (-1.0%) lagged.
Treasuries retreated throughout the session, ending just above their lows. The benchmark 10-yr yield rose two basis points to 2.65%.
Participation was well below average as less than 630 million shares changed hands at the NYSE.
Also of note, Ukraine's regions of Donetsk and Lugansk have declared independence after Sunday referendums showed overwhelming support for breaking away from Ukraine. Following yesterday's vote, the council of Donetsk has petitioned for accession to the Russian Federation.
Economic data was limited to the Treasury budget, which posted a surplus of $106.90 billion in April 2014, down from a surplus of $112.90 billion in April 2013. The Treasury data are not seasonally adjusted and the April surplus cannot be compared with the results from March. The consensus expected a budget surplus of $114.00 billion. The Congressional Budget Office released their monthly budget preview last week and predicted a surplus of $114.00 billion. The market is well aware of the CBO's forecast and generally does not react to the actual budget release.
Tomorrow, the Retail Sales report for April (consensus +0.3%) and April Import/Export Prices will be released at 8:30 ET, while the Business Inventories report for March (consensus +0.4%) will cross the wires at 10:00 ET.
* S&P 500 +2.6% YTD * Dow Jones Industrial Average +0.7% YTD * Nasdaq Composite -0.8% YTD * Russell 2000 -2.5% YTD