The S&P 500 closed lower by 0.38% and the Dow was off 0.47%. Stocks started off lower before a sustained rally into the afternoon. Buyers dried up and there was a reversal in the final hour of trading with the market closing near the lows of the day.
Media, semiconductors, and consumer discretionary stocks were the leaders while high dividend paying issues and interest rate sensitive names lagged. Some media names traded higher after reporting earnings that were slightly disappointing. Names in the group were higher on speculation regarding potential mergers activity. Internet stocks were led higher by Expedia (+18%) and Facebook.
Smaller semiconductor names were in favor today on the strength of stronger than reported earnings. Many of these names have a broad exposure to the overall technology sector, so their reports bode well for the entire tech sector.
Gold and silver sold off sharply. Several key technical levels are in play now for the gold market. Volatility for the metal is spiking when key technical resistance and support levels are hit. Gold buyers drove the price through resistance over the past few days, but there was definitely weak demand for gold today.
Initial jobless claims declined 10,000 to 340,000. The Department of Labor indicated that California has finally cleared through the backlog of claims in the state so this was the most accurate release since the government shutdown.
The Chicago Purchasing Managers Index (PMI) recorded its largest one month increase in 30 years. The actual number of 65.9 was well above the consensus estimate of 55.0 and last month’s number of 55.7. Some suggested that the size of the surprise and the recent government shutdown led to a number that was somewhat dubious.
Financials were a clear laggard today posting a decline of 0.80%. There was little in the way of news or key earnings releases today for the sector. Selling intensified in the final hour of trading and was a key driver in the overall weakness of the market into the close.
Industrials were ahead of the tape and many of the leaders closed higher on the day. ITT reported better than expected earnings and soared more than 7%. In general, earnings reports have shown that revenue growth is stronger than expected for the industrial sector and many management teams are guiding continued improvement for forward quarters. Aerospace and defense names continue to move to new highs.
Consumer discretionary names outperformed staples today. Avon and Weight Watchers both sold off by more than 20% on disappointing earnings releases. Starbucks released earnings that were ahead of expectations but sold off sharply at the open before recovering and closing higher.
Source: PFS Group
