Growth stocks weigh down S&P 500 amid higher yields
19-Feb-21 16:20 ET
Dow +0.98 at 31494.32, Nasdaq +9.11 at 13874.49, S&P -7.26 at 3906.71 https://www.briefing.com/stock-market-update
[BRIEFING.COM] The S&P 500 declined 0.2% on Friday, as the continued rise in long-term interest rates pressured many of the growth stocks, whose losses overshadowed the strong gains in the cyclical stocks.
The Nasdaq Composite (+0.1%) and Dow Jones Industrial Average (unch) closed little changed, with the Dow setting an all-time high early in the session. The Russell 2000 outperformed with a noteworthy 2.2% gain amid strength in small-cap financial and energy stocks.
Notably, the yield on the 10-yr Treasury note rose another six basis points to 1.35% amid a pro-cyclical news cycle that supported continued selling in longer-dated maturities. To name a few, Treasury Secretary Yellen reiterated the "think big" approach to stimulus, reports suggested that the U.S. will double its vaccine supply in the coming weeks, and earnings/economic data continued to beat expectations.
The S&P 500 materials (+1.9%), energy (+1.6%), industrials (+1.6%), and financials (+1.2%) sectors took the news in stride, with Deere (DE 330.00, +29.75, +9.9%) providing an additional boost for the industrials sector following its positive earnings report. DE shares climbed 10% to fresh all-time highs.
The Philadelphia Semiconductor Index (+2.4%) was another area of strength, as chipmakers rallied around strong quarterly results and guidance from Applied Materials (AMAT 119.46, +6.03, +5.3%).
The market, however, was restrained by influential declines in the information technology (-0.2%), communication services (-1.1%), and consumer discretionary (-0.9%) sectors amid valuation-oriented weakness in their mega-cap growth components. The Vanguard Mega Cap Growth ETF (MGK 211.63, -1.74, -0.8%) declined 0.8%.
The utilities (-1.5%), consumer staples (-1.2%), and health care (-1.2%) sectors also dragged on performance.
The 2-yr yield increased one basis point to 0.11%. The U.S. Dollar Index decreased 0.2% to 90.37. WTI crude futures pulled back 2.1%, or $1.27, to $59.15/bbl.
Reviewing Friday's economic data:
Existing home sales increased 0.6% m/m in January to a seasonally adjusted annual rate of 6.69 million (Briefing.com consensus 6.56 million) from a downwardly revised 6.65 million (from 6.76 million) in December. Total sales in January were up 23.7% from a year ago.
The key takeaway from the report is that the supply of existing homes for sale is at an all-time low. That is going to be a pressure point that feeds higher prices, limits total sales potential, and creates affordability pressures that will increase with rising mortgage rates.
The IHS flash Markit Manufacturing PMI checked in at 58.5 vs. 59.2 in December; the flash Services PMI checked in at 58.9 vs. 58.3 in December.
Looking ahead, investors will receive the Conference Board's Leading Economic Index (LEI) for January on Monday.
Russell 2000 +14.8% YTD
Nasdaq Composite +7.7% YTD
S&P 500 +4.0% YTD
Dow Jones Industrial Average +2.9% YTD
Dow 31494.32 +0.98 (0.00%)
Nasdaq 13874.49 +9.11 (0.07%)
SP 500 3906.71 -7.26 (-0.19%)
10-yr Note -4/32 1.313
NYSE Adv 2118 Dec 1054 Vol 1.1 bln
Nasdaq Adv 2705 Dec 1249 Vol 6.6 bln
Strong: Industrials, Financials, Energy, Materials
Weak: Utilities, Health Care, Consumer Staples, Communication Services, Consumer Discretionary
Moving the Market
-- Cyclical sectors support market amid growth optimism, but rise in long-term interest rates pressure growth stocks
-- 10-yr yield closes at 1.34%
-- Russell 2000 outperformed, Dow set all-time high
Energy stocks rise despite pullback in oil prices
19-Feb-21 15:25 ET
Dow +58.19 at 31551.53, Nasdaq +21.95 at 13887.33, S&P -0.87 at 3913.10
[BRIEFING.COM] The S&P 500 is trading back at its flat line, while the Dow (+0.2%) remains on pace to close at another record high.
One last look at the S&P sectors shows materials (+2.1%), industrials (+1.8%), energy (+1.7%), and financials (+1.3%) supporting the broader market with solid gains, while the health care (-0.9%), communication services (-0.9%), consumer staples (-1.1%), and utilities (-1.5%) trade sharply lower.
WTI crude futures settled lower by 2.1%, or $1.27, to $59.15/bbl.