The Week In Review
11/24-11/28/14The stock market endured some post-Thanksgiving indigestion brought on by severe weakness in the energy sector (-6.4%). The S&P 500 (-0.3%) ended at its lowest point of the day while the Nasdaq (+0.1%) eked out a slim gain thanks to the absence of energy stocks within the tech-heavy index.
Equities began the Black Friday session with investors paying more attention to the oil pits than mall parking lots as black gold was taking a beating. This morning, crude oil was trading near $69.00/bbl after yesterday's OPEC decision to maintain output at 30 million barrels per day. That represented a 6.0% loss, which led to comparable weakness in the energy sector.
Despite the plunge in energy, the market was able to recover with help from health care (+0.6%), technology (+0.5%), and the two consumer sectors (discretionary +1.2%; staples +1.3%), both of which benefited from strength among retailers. Dow component Wal-Mart (WMT 87.54, +2.56) spiked 3.0% after more than 22 million customers visited Wal-Mart stores on Thursday, suggesting a strong start to the holiday shopping season. The broader SPDR S&P Retail ETF (XRT 94.31, +0.84) advanced 0.9%.
However, as the session neared the end, the focus shifted to the oil pits once again where crude dropped below yesterday's low to $67.28/bbl, representing an 8.7% decline.
In turn, the slide in crude pressured the energy sector, and the broader market, to a fresh low for the day. Major sector components took a beating with BP (BP 39.32, -2.27), Chevron (CVX 108.87, -6.24), ExxonMobil (XOM 90.54, -3.94), and Halliburton (HAL 42.20, -5.14) sinking between 4.2% and 10.9%.
Elsewhere, the materials sector (-2.3%) could not escape the overall weakness among commodities. Copper tumbled 3.7% to $2.847/lb while gold fell 2.5% to $1.167.80/ozt. Last, but not least, silver cratered 7.0% to $15.44/ozt. Miners and steelmakers felt the weight with Market Vectors Steel ETF (SLX 39.50, -1.42) and Market Vectors Gold Miners ETF (GDX 18.36, -1.74) plunging 3.5% and 8.7%, respectively.
Making matters worse for commodities was the strengthening dollar, evidenced by a 0.5% advance in the Dollar Index (88.41, +0.39).
The commodity weakness also pressured some components of the industrial sector (-0.8%) like Caterpillar (CAT 100.60, -5.19), which fell 4.9%. However, the sector was able to avoid larger losses thanks to a flat finish from the Dow Jones Transportation Average. Still, the bellwether surrendered its intraday gain after a tug-of-war between railroad stocks and airlines. Rail carriers, who benefit from higher oil prices, tumbled with CSX (CSX 36.49, -1.42), Norfolk Southern (NSC 111.67, -5.53), and Union Pacific (UNP 116.81, -6.00) falling between 3.8% and 4.9%. In turn, air carriers like Delta Air Lines (DAL 46.67, +2.43) and United Continental (UAL 61.23, +4.63) cheered lower fuel prices, soaring higher by 5.5% and 8.2%, respectively.
When the dust settled, the major outage in the energy sector proved too much for the stock market to overcome. Furthermore, the inability of the sector to recover even a small portion of its losses, led to profit taking from areas that displayed strength. For instance, the iShares Nasdaq Biotechnology ETF (IBB 303.90, +0.03) ended flat after being up near 1.0% at the start. Meanwhile, small caps made new lows into the afternoon with the Russell 2000 ending lower by 1.5%.
Treasuries benefited from the sloppy equity session with the 10-yr yield sliding five basis points to 2.18%.
Participation was relatively heavy considering the abbreviated session. More than 635 million shares changed hands at the NYSE floor.
Monday's data will be limited to the November ISM Index, which will be released at 10:00 ET (Briefing.com consensus 58.0).
Week in Review: Stocks Climb Into Thanksgiving
The major averages kicked off the holiday-shortened week with an advance that was paced by the Russell 2000 (+1.2%). The small-cap index was followed by the Nasdaq Composite (+0.9%) while the Dow (+0.04%) and S&P 500 (+0.3%) ended closer to their flat lines. Stocks rallied out of the gate with upbeat action overseas contributing to the early strength. Equities in China and Hong Kong spiked in reaction to Friday's PBoC rate cut while European markets were boosted by increased expectations of a forthcoming sovereign QE program from the European Central Bank. To that point, Credit Suisse said it expects the ECB to announce plans for sovereign asset purchases in December. ECB member and German Bundesbank President Jens Weidmann pushed back against the easing expectations, reminding that monetary policy alone is unable to create growth and requires corresponding measures from the fiscal side. Despite Mr. Weidmann's comments, the market's expectation for more QE manifested itself through increased demand for Italian and Spanish debt. Italian and Spanish 10-yr yields both fell five basis points to their respective 2.15% and 1.97%.
Equities ended the Tuesday session on a flat note. The S&P 500 shed 0.1% after spending the day in a ten-point range while the other indices also settled near their unchanged levels. Despite the flat finish, equity indices rallied at the start after the second revision to Q3 GDP surprised to the upside (3.9%; Briefing.com consensus 3.2%). However, the opening spike marked the session high for the S&P 500, which returned to unchanged by the end of the first hour.
The key indices ended Wednesday near their best levels of the day with the Nasdaq Composite (+0.6%) finishing in the lead. The S&P 500 settled higher by 0.3% while the Dow Jones Industrial Average hovered near its flat line throughout the session. Meanwhile, the benchmark index spent the day in a slow and steady advance despite a heavy batch of disappointing economic data that was reported on Wednesday. The index did show some signs of defensive posturing as all four countercyclical sectors ended ahead of the market while cyclical sectors traded in mixed fashion. The telecom services sector (+1.2%) finished in the lead after trending higher throughout the day, but more notably, the heavily-weighted health care sector (+0.7%) posted a solid gain with help from biotechnology.