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Wall Street Ends Range-Bound Session On Mixed Note
18-Apr-18 16:20 ET
Dow -38.56 at 24748.07, Nasdaq +14.14 at 7295.23, S&P +2.25 at 2708.64

https://www.briefing.com/investor/markets/stock-market-update/2018/4/18/wall-street-ends-rangebound-session-on-mixed-note.htm

[BRIEFING.COM] The major averages were range-bound on Wednesday, finishing the session little changed. Investors took in the latest batch of first quarter earnings, which featured reports from IBM (IBM 148.79, -12.12) and Morgan Stanley (MS 53.26, +0.02), and watched crude oil futures return to their highest level in more than three years. The S&P 500 and the Nasdaq Composite finished higher by 0.1% and 0.2%, respectively, closing in the green for a third straight session, while the Dow Jones Industrial Average lagged, finishing lower by 0.2%.

IBM shares dropped 7.5% on Wednesday, as investors looked past the tech giant's above-consensus first quarter profits and revenues, instead focusing on its disappointing gross margin rate, the quality of its revenue (more from hardware and less from cloud), and its relatively conservative profit guidance for fiscal year 2018. The broader technology sector finished a tick lower, shedding 0.2%, closing near the middle of the sector standings.

The financial group, meanwhile, declined 0.4%, continuing to struggle despite blow-out Q1 results from Morgan Stanley -- which included better-than-expected earnings and revenues. Shares of the investment bank were up and down on Wednesday before eventually finishing flat. Morgan Stanley joins a list of financial firms that have struggled after reporting upbeat Q1 results -- including JPMorgan Chase (JPM 109.32, -0.89), Wells Fargo (WFC 50.39, -0.18), Citigroup (C 68.98, -0.76), Bank of America (BAC 29.53, -0.51), and Goldman Sachs (GS 254.00, +0.37).

A slight steepening of the yield curve helped underpin financials to some degree however, bringing the 2s10s spread up from the more than 10-year low it touched on Tuesday. The yield on the benchmark 10-yr Treasury note climbed five basis points to 2.87%, while the yield on the 2-yr Treasury note advanced two basis points to 2.42%.

Meanwhile, West Texas Intermediate crude futures rallied 2.7% to $68.31 per barrel, rebounding from back-to-back down days. WTI crude futures have surged 10.0% since April 6, initially underpinned by the belief that heightened tensions in the oil-rich Middle East could lead to a slowdown in production. Tensions appear to have been dialed back following a one-off U.S.-led strike on Syria over the weekend, but the commodity continues to challenge its best level since November-December 2014. The Department of Energy's weekly inventory report, which showed that U.S. crude stockpiles declined by 1.1 million barrels last week, helped fuel Wednesday's crude rally.

The energy sector has unsurprisingly benefited from the increase in crude prices, adding another 1.6% on Wednesday to extend its April gain to 9.1%; for comparison, the S&P 500 is up 2.6% month to date. Energy finished at the top of Wednesday's sector standings, with industrials (+1.0%) being the next-best performer. Within the industrial space, transports showed particular strength, pushing the Dow Jones Industrial Average higher by 1.7%, after United Continental (UAL 70.58, +3.24, +4.8%) and CSX (CSX 61.01, +4.44, +7.9%) reported above-consensus first quarter results.

On the downside, the consumer staples space was the worst-performing sector, losing 0.9%, with tobacco names leading the retreat after analysts at Goldman downgraded shares of Altria (MO 61.50, -2.48) to 'Neutral' from 'Buy'; Altria shares lost 3.9%. In general, countercyclical sectors underperformed their cyclical peers, but, as mentioned above, the cyclical financials and technology groups -- which are the two most influential sectors -- were notable laggards, keeping the broader market's gain in check.

Trading volume was light once again on Wednesday, with just 770 million shares changing hands at the New York Stock Exchange -- about 17% less than the 50-day moving average.

Reviewing Wednesday's economic data, which was limited to the Fed's Beige Book for March and the weekly MBA Mortgage Applications Index:

The Fed's Beige Book showed that economic activity continued to expand at a modest to moderate pace across the 12 Federal Reserve Districts in March and early April. Outlooks remained positive, but contacts in various sectors including manufacturing, agriculture, and transportation expressed concern about the newly imposed and/or proposed tariffs. Upward wage pressures persisted, but generally did not escalate; most Districts reported wage growth as only modest.
The weekly MBA Mortgage Applications Index increased 4.9% to follow last week's 1.9% decline.

On Thursday, investors will receive the weekly Initial Claims report (Briefing.com consensus 226K), the Philadelphia Fed Index for April (Briefing.com consensus 21.0), and the Conference Board's Leading Economic Index for March (Briefing.com consensus +0.4%).

Nasdaq Composite: +5.7% YTD
Russell 2000: +3.1% YTD
S&P 500: +1.3% YTD
Dow Jones Industrial Average: +0.1% YTD