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Financial Rally Helps Mitigate Technology Sell Off
29-Nov-17 16:25 ET
Dow +103.97 at 23940.68, Nasdaq -87.97 at 6824.38, S&P -0.97 at 2626.07

https://www.briefing.com/investor/markets/stock-market-update/2017/11/29/financial-rally-helps-mitigate-technology-sell-off.htm

[BRIEFING.COM] Stocks had a mixed outing on Wednesday as heavy losses in technology shares roughly balanced gains in financials and most other areas.

The S&P 500 (unch) finished a tick below its flat line, while the Dow Jones Industrial Average (+0.4%) and the Russell 2000 (+0.4%) both advanced to new record highs.

Conversely, the tech-heavy Nasdaq retreated from its record mark, dropping 1.3%, with its five largest components by market cap--Apple (AAPL 169.48, -3.59), Microsoft (MSFT 83.34, -1.54), Amazon (AMZN 1161.27, -32.33), Facebook (FB 175.13, -7.29), and Alphabet (GOOG 1021.66, -25.75)--losing between 1.8% and 4.0%.

Chipmakers also weighed heavily on the Nasdaq, sending the PHLX Semiconductor Index (-4.4%) to a fresh November low.

Wednesday's technology sell off wasn't fueled by a particular catalyst, rather, it was the result of investors dialing back their technology holdings following an impressive year-to-date run. Even with today's decline of 2.6%, the S&P 500's technology sector remains comfortably atop the 2017 sector standings with a year-to-date gain of 35.7%.

For comparison, the S&P 500 has climbed 17.3% year to date and the second-best performing group--health care--is up 20.0%.

Most sectors benefited from increased buying on Wednesday--especially the financials (+1.8%) and telecom services (+2.7%) groups--as investors looked to reallocate their former technology funds. Being second only to technology in terms of weight, the financial sector helped keep the S&P 500's loss in check throughout the session.

Within the financial group, heavyweights like JPMorgan Chase (JPM 103.73, +2.37), Bank of America (BAC 28.28, +0.64), Wells Fargo (WFC 56.68, +1.11), and Citigroup (C 75.04, +1.34) finished with gains between 1.8% and 2.3%.

Meanwhile, industrial shares also outperformed on Wednesday, especially transports--which sent the Dow Jones Transportation Average (+3.3%) to a new all-time high.

In Washington, Fed Chair Janet Yellen gave her semiannual testimony before the Joint Economic Committee, but the event had little to no impact on the equity market. Ms. Yellen released her prepared remarks prior to her appearance, reiterating her view that the lull in inflation is due to transitory factors.

U.S. Treasuries sold off in a curve-steepening trade, widening the 2yr-10yr spread to 62 basis points. The yield on the benchmark 10-yr Treasury note climbed four basis points to 2.38%, while the 2-yr yield jumped one basis point to 1.76%.

Elsewhere, the major European bourses finished Wednesday's session mixed; Germany's DAX (unch) and France's CAC (+0.1%) closed with slim gains, while the UK's FTSE dropped 0.9%. UK equities tumbled amid an increase in the pound relative to the U.S. dollar (1.3411, +0.0066, +0.5%).

Stock indices in the Asia-Pacific region closed little changed, with Japan's Nikkei (+0.5%) showing relative strength.

Reviewing Wednesday's batch of economic data, which included the second estimate of third quarter GDP, October Pending Home Sales, the Fed's Beige Book for November, and the weekly MBA Mortgage Applications Index:

The second estimate of third quarter GDP pointed to an expansion of 3.3% (Briefing.com consensus +3.2%), up from 3.0% in the initial reading. Meanwhile, the Q3 GDP Deflator was revised to +2.1% (Briefing.com consensus +2.2%) from +2.2%.
The key takeaway from the report is that economic output grew at its strongest pace since the first quarter of 2015, driven by a pickup in both consumer and business spending -- and despite the disruptions created by the hurricanes.
Pending Home Sales for October rose 3.5% (Briefing.com consensus +0.6%). Today's reading follows a revised 0.4% decrease in September (from 0.0%).
The Fed's Beige Book for November showed that economic activity continued to increase at a modest to moderate pace across the 12 Federal Reserve Districts. In addition, most Districts reported a modest to moderate increase in employment, wages, and selling prices. The outlook for holiday sales was reported to be generally optimistic.
The weekly MBA Mortgage Applications Index decreased 3.1% to follow last week's 0.1% uptick.

On Thursday, investors will receive October Personal Income (Briefing.com consensus +0.3%), October Personal Spending (Briefing.com consensus +0.3%), October PCE Prices (Briefing.com consensus +0.1%), and weekly Initial Claims (Briefing.com consensus 238K) at 8:30 ET, followed by the Chicago PMI for November (Briefing.com consensus 63.0) at 9:45 ET.

Nasdaq Composite +26.8% YTD
Dow Jones Industrial Average +21.1% YTD
S&P 500 +17.3% YTD
Russell 2000 +13.6% YTD