TheChek News Flow

Closing Market Summary: Stocks Rebound, Snapping a 5-Day Losing Streak

The stock market ended the Thursday affair on a higher note as the major averages erased opening losses. Factors impacting today's reversal included softening in the dollar, resiliency in the broader market, and rebounds in the heavily-weighted health care (+0.4%), consumer discretionary (+0.4%), and financial (+0.3%) sectors. The Dow Jones Industrial Average (+0.5%) ended ahead of the S&P 500 (+0.3%) and the Nasdaq Composite (+0.2%). The S&P 500 avoided its sixth consecutive decline. 

Equity indices began the day under pressure as investors weighed a continued sell-off in global bourses. The latest bout of selling followed decisions by the Fed, Bank of Japan, and Bank of England to maintain their respective monetary policy positions. However, participants were apprehensive of the moves, eyeing global economic concerns and the upcoming Brexit vote. The major averages fell through the morning with the S&P 500 eventually finding support near the 2050 area.

The benchmark index trimmed its loss through the late morning, retaking its first level of technical support at 2062/2064. The rebound accelerated when British Prime Minister David Cameron voiced his support for suspending Brexit campaigning for the day. Both sides agreed to the halt in official campaigning after lawmaker Jo Cox was attacked and killed earlier in the day. On a side note, investors likely began today's session with heavy short-positioning and needed to make adjustments given the sharp reversal in the broader market. 

The major averages finished near their highs as nine sectors settled in the green. In front of the pack, telecom services (+0.8%), utilities (+0.7%), and consumer staples (+0.6%) led while heavily-weighted health care (+0.4%), consumer discretionary (+0.4%), and financials (+0.3%) each staged meaningful rebounds.

The countercyclical health care space (+0.4%) demonstrated relative strength as Dow component Merck (MRK 57.50, +1.41) jumped 2.5%. The stock topped the price-weighted index after reporting positive endpoint results for its KEYNOTE-024 trial. Elsewhere, health care plan names outperformed as Anthem (ANTM 132.28, +1.67) and CIGNA (CI 128.69, +2.13) gained 1.3% and 1.7%, respectively.

The economically-sensitive financial sector (+0.3%) rebounded from a 1.3% loss as investors eyed a downtick in Treasuries and a rebound in European banks. On that note, Deutsche Bank (DB 14.90, +0.08) ended higher by 0.5% after notching a fresh all-time low ($14.13) earlier in the session. Elsewhere, rate-sensitive real estate investment trusts outperformed as the likelihood of future rate hikes declined.

In the consumer discretionary space (+0.4%), Viacom (VIAB 45.05, +2.85) rallied 6.8% after reports indicated that five directors of the company were ousted from the Board of Directors. In response, the stock received an upgrade to "Buy" at BTIG Research. Separately, large cap Priceline (PCLN 1323.89, +18.31) and Lowe's (LOW 78.17, +1.13) gained 1.4% and 1.5%, respectively.

The U.S. Dollar Index (94.56, -0.05) ended its day flat as the euro and the pound made up ground against the buck. The euro ended lower by 0.2% against the dollar (1.1238) while the pound/dollar finished higher by 0.1% (1.4214). The currency pair reversed off the 1.4010 price level earlier in the session.

The Treasury complex ended on a mixed note with the yield on the 10-yr note finishing flat at 1.57%.

Today's participation was above the recent average as more than 865 million shares changed hands on the NYSE floor. 

Today's economic data included the CPI Report for May, weekly initial claims, the Philadelphia Fed Survey for June, first quarter Current Account Balance, and the June NAHB Housing Market Index: 

• The Consumer Price Index for May didn't generate any negative headline surprises. The all items index was up 0.2% (consensus +0.3%) while the index for all items less food and energy also increased 0.2%, as expected.
  • A 0.4% increase in the shelter index and a 0.5% jump in the medical care services index drove core CPI higher, as they helped offset a 1.3% decline in the used cars and trucks index and a 0.1% decline in the new vehicles index.
  • A 0.2% decline in the food index helped tamp down total CPI, which moved up for the month on the back of a 1.2% increase in the energy index. The latter was led by a 2.3% jump in the gasoline index.
• On an unadjusted basis, total CPI is up 1.0% over the last 12 months, versus a 1.1% increase for the 12 months ending in April.
• Core CPI is up 2.2% versus up 2.1% for the 12 months ending in April.
  • The uptick in core CPI might catch the Fed's eye, yet that's no sure thing knowing the Fed didn't raise rates in March when core CPI was up 2.3% year-over-year.
• The initial claims report was pretty status quo. It showed claims increasing 13,000 for the week ending June 11 to 277,000 (consensus 269,000).
  • The status quo element there was that claims remained below 300,000 for the 67th straight week.
  • There were no special factors influencing the initial claims reading, which lowered the four-week moving average by 250 to 269,250.
• Continuing claims for the week ending June 4 increased by 45,000 to 2.157 million.
  • The four-week moving average for this series, though, edged up by only 1,000 to 2.150 million.
• The Philadelphia Fed Index jumped almost seven points to 4.7 in June (consensus estimate of 0.7)
  • In doing so, it bumped the index out of contraction mode, evidenced by negative readings in April and May.
  • This regional manufacturing report follows on the heels of the Empire Manufacturing Survey for June, which also saw a nice uptick (to 6.0 from -9.0) that tipped things back into an expansion mode.
  • For the Philadelphia Fed Index, the headline isn't quite as encouraging as it looks.
  • That's because the main driver was the prices paid index, which moved from 15.7 to 23.0, and the delivery times index, which improved from -14.6 to -8.3.
  • Notably, the new orders index worsened, slipping from -1.9 to -3.0, as did the shipments index, which dropped from -0.5 to -2.1, and the unfilled orders index, which fell from -8.8 to -12.6.
  • In turn, the survey's future indicators decreased for the second consecutive month, with the diffusion index for future general activity dipping from 36.1 to 29.8.
• The current account deficit for the first quarter totaled $124.7 billion while the consensus expected the deficit to hit $125.4 billion. The fourth quarter deficit was revised to $113.4 billion from $125.3 billion.
• The NAHB Housing Market Index for June came in at 60 from an unrevised 58 in May while the consensus expected the reading to come in at 59.0.

Tomorrow's data will be limited to Housing Starts (consensus 1,150k) and Building Permits (consensus 1,150k) for May, which will be released at 8:30 ET.  

• Nasdaq Composite -3.3% YTD 
• Dow Jones +1.8% YTD
• S&P 500 +1.7% YTD
• Russell 2000 +0.9% YTD