The S&P 500 found some reprieve on Wednesday with a slim gain of 0.3%, with cyclical sectors mounting a rebound effort. The benchmark index was up as much as 1.1% but fumbled most of its gains in the last hour of trading. Wednesday's session did feature some lower-than-usual volume with U.S. markets closed on Thursday for Thanksgiving Day.
Meanwhile, the Nasdaq Composite gained 0.9%, and the Russell 2000 gained 1.3%, and the Dow Jones Industrial Average finished flat.
The S&P sectors that outperformed the broader market were energy (+1.6%), communication services (+1.0%), consumer discretionary (+1.0%), materials (+0.8%), industrials (+0.7%), and information technology (+0.6%).
Energy companies rose in tandem with WTI crude rebounding 1.8% to $54.38/bbl. Crude shrugged off ongoing supply concerns that have recently pressured oil prices; on Wednesday, the U.S. Energy Information Administration reported a ninth consecutive weekly build in crude with a higher-than-expected build of 4.9 million barrels last week. Crude cut its weekly losses to 3.7% but is still roughly 30.0% lower from last month's four-year high.
Transport stocks also had a solid showing, as the Dow Jones Transportation Average rose 1.5%. Airline stocks outperformed with no specific catalyst, but relatively lower oil prices and an anticipated 30.5 million people flying this Thanksgiving weekend, according to CNBC, helped support the group. The average, however, is still down 2.1% this week.
The battered FANG group traded on a mixed note on Wednesday in what has been a woeful quarter for the bunch. Facebook (FB 134.82, +2.39, +1.8%), Alphabet (GOOG 1037.61, +11.85, +1.2%), and Amazon (AMZN 1516.73, +21.27, +1.4%) finished with comfortable gains, while Apple (AAPL 176.78, -0.20, -0.1%) and Netflix (NFLX 262.13, -4.85, -1.8%) finished lower.
Conversely, the defensive-oriented real estate (-0.1%), health care (-0.5%), consumer staples (-0.8%), and utility (-1.5%) sectors, which have largely outperformed this month, underperformed the broader market on Wednesday. The four groups were the only ones to close in the red.
Earnings were mostly positive with retailers Foot Locker (FB 134.82, +2.39, +1.8%) and Gap (GPS 25.81, +1.15, +4.7%) reporting above-consensus bottom lines. Conversely, Deere (DE 141.88, +3.36, +2.4%) missed both top and bottom line expectations, but still traded higher amid an upside outlook. Deere's worldwide sales of agriculture and turf equipment are forecast to be up about 3.0% in 2019.
In other corporate news, Dow component Johnson & Johnson (JNJ 141.99, -4.46) fell 3.1% after a U.S. appeals court refused to stop generic versions of its prostate-cancer drug Zytiga from entering the market, according to Bloomberg. Of note, the company did hit an all-time high in the previous session.
Separately, U.S. Treasuries edged lower, pushing yields higher across the curve. The 2-yr yield increased three basis points to 2.82%, and the 10-yr yield added one basis point to 3.06%. The flattening of the yield curve helped keep the financial sector (+0.1%) in check, as lenders rely on the difference between what they can charge for deposits and what they can make on loans. Meanwhile, the U.S. Dollar Index shed 0.1% to 96.73.
Overseas, equity indices in the Asia-Pacific region closed Wednesday on a mixed note. U.S. Trade Representative Robert Lighthizer released a report on China's intellectual property practices, alleging that China has not altered its "unfair, unreasonable, and market-distorting practices" that led to the imposition of tariffs. China's Shanghai Composite added 0.2%. In Europe, the major indices closed on a higher note with Germany's DAX (+1.6%) leading the advance.
Reviewing the smorgasbord of data investors received on Wednesday, which included Existing Home Sales for October, Durable Orders for October, weekly Initial Claims and Continuing Claims, the Conference Board's Leading Economic Index for October, the final reading of the University of Michigan Index of Consumer Sentiment for November, and the weekly MBA Mortgage Applications Index:
- Existing home sales increased 1.4% month-over-month in October to a seasonally adjusted annual rate of 5.22 million (Briefing.com consensus 5.20 million). The October reading represented the first month-over-month increase in seven months. Total sales were 5.1% lower than the same period a year ago.
- The key takeaway from the report is that even with the October increase, the level of sales remains at levels from late 2016 as higher mortgage rates and a limited supply of lower-priced homes weigh.
- Durable Goods orders for October decreased 4.4% (Briefing.com consensus -2.6%) after decreasing a revised 0.1% (from +0.8%) in September. Excluding transportation, durable goods orders increased 0.1% (Briefing.com consensus +0.4%) after a revised 0.6% decrease (from +0.1%) in September.
- The key takeaway from the report is that the headline decline was driven by a drop in aircraft orders while motor vehicle and parts orders increased modestly.
- Initial claims for the week ending November 17 increased by 3,000 from last week's revised rate of 221,000 (from 216,000) to 224,000 (Briefing.com consensus 215,000). Continuing claims for the week ending November 10 decreased by 2,000 from last week's revised level of 1.670 million (from 1.676 million) to 1.668 million.
- The key takeaway from the report is that even with the upward revision to last week's reading, claims remain not far above multi-decade lows. This week's miss is likely the result of economists basing their estimates on last week's unrevised reading.
- The Conference Board's Leading Economic Index increased 0.1% in October (Briefing.com consensus 0.1%) after increasing a revised 0.6% (from 0.5%) in September.
- The key takeaway from the report is that the Conference Board believes that while the Leading Index still points to robust growth in early 2019, the rapid pace of growth may have already peaked. The Conference Board expects longer-term growth to moderate around 2.5%.
- The final reading of the University of Michigan Index of Consumer Sentiment for November ticked down to 97.5 (Briefing.com consensus 98.3) from 98.3 in the preliminary reading.
- The key takeaway from the report is that the modest downtick was due to changes in sentiment among different income earners. Those in the bottom third of the income distribution reported an increase in sentiment while those in the top third of the income distribution reported a decrease in sentiment. There was no change in sentiment among Democrats and Republicans after the midterm election.
- The weekly MBA Mortgage Applications Index showed a decrease of 0.1% to follow the prior decline of 3.2%.
Looking ahead, the market will be closed on Thursday, and will close early on Friday (1:00 PM ET). Investors will not receive any notable economic data for the rest of the week.
- Nasdaq Composite +1.0% YTD
- Dow Jones Industrial Average -1.0% YTD
- S&P 500 -0.9% YTD
- Russell 2000 -3.1% YTD