Stocks closed higher, although well off today’s highs. The S&P 500 rose by 0.37%, and the Dow was higher by 0.14%. Late afternoon selling came in and greatly reduced the gains seen in the morning session. The Nikkei again sold off sharply overnight. The Japanese index sold off in response to new foreign exchange margin trading rules.
Financials were a leading sector today. Banks and brokers will benefit from an increase in interest rates. As rates move higher, financials will see their net interest margins expand. Major banks were higher across the board. Regional banks also benefited from the rotation into financials. Major investment banks Morgan Stanley and Goldman Sachs were also higher on the day.
The NASDAQ was helped out by strength in technology and biotechnology. The biotech sector was up close to 2% on the day. Semiconductor equipment maker Applied Materials led the semi sector today. The stock moved higher by 3% after management said that the second half of the year will be stronger than expected. Chip maker Avago Tech rose by close to 10%, as they said their business with Apple is off to a stronger than expected start. This had a positive impact on the entire space. Apple was also up on the day, as the former leader continues to come back.
Precious metals traded higher on the day. Gold and silver traded higher all day, with gold gaining more than 1%, and silver trading higher by more than 2%.
Q1 GDP growth was revised marginally lower to 2.4%. Growth in final sales was revised higher. The revisions were not material, and came in line with expectations. Initial jobless claims increased to 354,000, rising by 10,000 from the prior week. Claims data around the Memorial Day holiday are especially volatile.
Pending home sales rose just 0.3% for April. The consensus estimate was for a rise of 1.5%. The recent increase in pending home sales point to gains in existing homes sales over the next few months, because pending home sales typically lead existing homes sales by a few months.
Aerospace and defense names were especially strong today. Goldman Sachs raised their rating on the space, after its huge outperformance in the year, to attractive from neutral. They noted that the area has underperformed the broad market since the 2008 lows; and, that, if the sequestration is the last cut of the downturn, then the group can outperform for several years.
Consumer discretionary stocks outperformed staples. The higher-yielding staple stocks are seeing selling pressure as investors are rotating to more growth-oriented stocks.
Source: PFS Group
