Closing Market Summary: Stocks End Mixed While Treasuries Slump
The major averages ended on a mixed note as the S&P 500 shed 0.3% while the Nasdaq added 0.1%. Equities spent the entire session climbing off their early lows after weakness in Europe set the stage for a lower open. European indices hovered near their worst levels of the day at the outset of the U.S. session after the European Commission lowered its 2014 GDP forecast for the region to 1.1% from 1.2%. Similar to equities, core EU bonds also sold off as Germany's 10-yr yield added four basis points to 1.74% while the French 10-yr yield rose six basis points to 2.21%. Although stocks began the U.S. session in negative territory, the buy-the-dip trade was at work once again, fueling a day-long rebound. The tech-heavy Nasdaq was able to eke out a modest gain thanks to the outperformance of biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 207.11, +1.44) rose 0.7%, extending its year-to-date advance to 51.1%. Meanwhile, the traditional tech sector ended just below its flat line. While most groups were able to rebound from their early lows, energy (-0.8%), financials (-0.5%), utilities (-0.8%), and telecom services (-1.9%) were not as fortunate. The energy sector was pressured by crude oil, which slid 1.3% to $93.40 per barrel. Meanwhile, the financial space underperformed for the second consecutive day, trimming its quarter-to-date advance to 3.0%. Although the sector continues to hold a solid gain for the quarter, the remaining nine groups have all had a better showing since the start of October. Only one other cyclical sector, consumer discretionary, ended north of its flat line. The group posted a razor-thin advance of 0.01% as quick-service restaurants masked broad losses among homebuilders. Restaurant names rallied in reaction to better-than-expected earnings from Red Robin Gourmet Burgers (RRGB 84.20, +7.44) while the iShares Dow Jones US Home Construction (ITB 22.20, -0.37) lost 1.6% as the increase in rates weighed. Treasuries sold off during morning trade before regaining a small portion of their losses in the afternoon. The benchmark 10-yr yield rose six basis points to 2.67%, its highest since October 16. Trading volume was just above average as 741 million shares changed hands on the floor of the New York Stock Exchange. Today's data was limited to the October ISM Services Index, which climbed to 55.4 from 54.4 (54.0 consensus). The strength in the services sector is not a surprise. Recent employment reports have shown an uptick in services hiring; moreover, October marks the 46th consecutive month in which economic activity in the non-manufacturing sector has expanded.
Business activity strengthened in October, with the series index rising to 59.7 from 55.1. The new orders index showed continued expansion with a print of 56.8, yet that was the second straight month in which new orders activity decelerated. The aforementioned index was at 60.5 in August and 59.6 in September. Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET and September Leading Indicators will cross the wires at 10:00 ET. o Nasdaq +30.5% YTD o Russell 2000 +29.9% YTD o S&P 500 +23.6% YTD o DJIA +19.2% YTD