Closing Market Summary: Cyclical Sectors Push Equities Higher
The major averages settled near their highs as the S&P 500 advanced 0.3% while the Dow Jones Industrial Average outperformed with a gain of 0.6%. Overall, today's session did not generate too much excitement even with investors receiving more than 200 quarterly reports between yesterday's close and today's open. Outside of some choppy action during the first hour, equity indices climbed steadily throughout the session. The Dow led from the start, keying off 3M's (MMM 123.49, +0.29) better-than-expected earnings. Meanwhile, the broader industrial sector (+0.7%) finished among the leaders as transports contributed to the strength. The Dow Jones Transportation Average gained 0.9% with airlines leading the pack after Alaska Air (ALK 69.68, +2.65) reported strong results.
Elsewhere, the discretionary sector (+1.0%) also provided leadership as homebuilders rallied in reaction to above-consensus earnings and revenue from PulteGroup (PHM 17.85, +1.17). The broader iShares US Home Construction ETF (ITB 23.18, +0.64) jumped 2.8%. In addition to builders, carmakers also underpinned the sector after Ford (F 17.76, +0.24) beat on earnings and issued upbeat guidance. While five of six cyclical groups ended with solid gains between 0.5% and 1.0%, the financial sector could not make a sustained move into positive territory until the final hour. The group added just 0.1% after spending the entire session just below its flat line. On the downside, all four countercyclical groups posted losses. Health care ended just below its flat line while consumer staples (-0.2%) and utilities (-0.2%) registered modest declines. The telecom services space (-1.0%) was the weakest sector of the day, pressured by shares of AT&T (T 34.63, -0.65) after the telecom giant reported a one-cent beat on revenue just below analyst estimates. Treasuries ended modestly lower with the 10-yr yield up 3.5 basis points at 2.52%. Trading volume was on the light side as just over 715 million shares changed hands on the floor of the New York Stock Exchange. Today's economic data was limited to weekly initial claims and the August trade balance report. Problems related to glitches from a computer upgrade in California continued to plague the initial claims data and artificially boosted headline levels. The weekly initial claims level fell to 350,000 from an upwardly revised 362,000 (from 358,000). The consensus expected claims to fall to 341,000. The Department of Labor stated that there was no way to separate the claims from California that were biasing the data from those in the private sector that lost their jobs as a result of the government shutdown. We have no way of determining the true level of layoffs, but it is likely around 310,000 -- 330,000 since overall labor trends have not changed much over the last couple of months. Separately, the trade deficit widened to $38.8 billion in August from a downwardly revised $38.6 billion reported in July. Tomorrow, September durable orders will be reported at 8:30 ET, the final reading of the Michigan Consumer Sentiment Survey will cross the wires at 9:55 ET, and August wholesale inventories will be announced at 10:00 ET.
o DJIA +18.4% YTD o S&P 500 +22.9% YTD o Nasdaq +30.1% YTD o Russell 2000 +31.7% YTD