Sector Investing

[ReturntoSender]

Market Snapshot

https://www.briefing.com/stock-market-update

Dow 34466.24 +19.10 (0.06%)
Nasdaq 14020.33 +108.58 (0.78%)
SP 500 4239.18 +19.63 (0.47%)
10-yr Note +4/32 1.449
NYSE Adv 1733 Dec 1525 Vol 887.8 mln
Nasdaq Adv 2236 Dec 1996 Vol 4.8 bln

Industry Watch
Strong: Health Care, Consumer Staples, Information Technology, Utilities, Real Estate
Weak: Financials, Materials, Industrials, Energy

Moving the Market

-- S&P 500 sets all-time highs while cyclical stocks and small-caps underperformed

-- CPI data for May was hotter than expected; weekly initial claims declined to new post-pandemic low

-- 10-yr yield pops then dips below flat line at 1.46%

S&P 500 gets over the hump and closes at record high
10-Jun-21 16:15 ET
Dow +19.10 at 34466.24, Nasdaq +108.58 at 14020.33, S&P +19.63 at 4239.18

[BRIEFING.COM] The S&P 500 gained 0.5% on Thursday, setting intraday and closing record highs in the process, as the market reacted positively to a hotter-than-expected Consumer Price Index (CPI) for May and a weekly initial claims trend that continued to improve.

The Nasdaq Composite (+0.8%) outperformed and closed near session highs, while the Dow Jones Industrial Average increased just 0.1% and the Russell 2000 decreased 0.7%. The underperformance of the Dow and Russell 2000, which are more cyclically-oriented, contradicted any growth optimism.

Briefly, total CPI rose 0.6% m/m in May (Briefing.com consensus 0.4%) and core CPI, which excludes food and energy, rose 0.7% m/m (Briefing.com consensus 0.4%). The year-over-year increases garnered the headlines, though, with total CPI up 5.0% and core CPI up 3.8%. In addition, weekly initial claims totaled 375,000 (Briefing.com consensus 365,000), which was its lowest level since March 14, 2020.

Despite the economic data feeding into reflationary/reopening themes, the market was guided by counter-cyclical sectors like health care (+1.7%), real estate (+1.0%), and consumer staples (+0.7%). The information technology sector (+0.8%) was another key leader alongside the mega-caps, excluding Apple (AAPL 126.11, -1.02, -0.8%).

Note, it didn't start that way. The financials (-1.1%), materials (-0.6%), industrials (-0.5%), and energy (-0.1%) sectors, which closed lower today, were among the leaders shortly after the open. The Dow was up as much as 0.8% and the small-cap Russell 2000 was up as much as 0.5%.

The inflation-sensitive 10-yr yield reasonably jumped to 1.53% soon after the CPI report, supporting the early move in the financials sector, but quickly turned around and settled at 1.46%. This was three basis points below yesterday's settlement.

Presumably, the Treasury market defaulted to its Fed-influenced view that a lot of inflation pressures will be transitory while potential harboring some peak growth rate concerns. A separate viewpoint suggested cyclical stocks succumbed to a sell-the-news reaction after outperforming so far this year.

The 2-yr yield increased one basis point to 0.15%. The U.S. Dollar Index decreased 0.1% to 90.06. WTI crude futures rose 0.6%, or $0.40, to $70.30/bbl.

Reviewing Thursday's economic data:

Total CPI increased 0.6% month-over-month in May (Briefing.com consensus 0.4%), with a 7.3% increase in the index for used cars and trucks accounting for about one-third of that increase. Core CPI, which excludes food and energy, jumped 0.7% (Briefing.com consensus 0.4%). On a year-over-year basis, total CPI was up 5.0% (vs. 4.2% in April), which was the largest increase since August 2008. Core CPI was up 3.8% year-over-year (vs. 3.0% in April), which was its largest increase since June 1992!
The key takeaway from the report, aside from it showing broad-based price increases, is that one can see the potential for stickier inflation looking at just the last six months when pandemic base effects weren't fully depressed. To wit, total CPI is running at an annualized rate of 5.8% over the last six months while core CPI is running at an annualized rate of 4.0%.
Initial claims for the week ending June 5 decreased by 9,000 to 375,000 (Briefing.com consensus 365,000), hitting their lowest level since March 14, 2020. Continuing claims for the week ending May 29 decreased by 258,000 to 3.499 million, which is the lowest since March 21, 2020.
The key takeaway from this report is that the trends are moving in a manner that reflects an economy that is moving with increased reopening vigor.
The Treasury Budget for May showed a $131.9 bln deficit, versus a $398.7 bln deficit in the same period a year ago. The budget data is not seasonally adjusted, so the May deficit can't be compared to the April deficit of $225.6 bln.
The fiscal year-to-date budget deficit is $2.06 trln versus -$1.88 trln for the same period a year ago. The budget deficit over the last 12 months is $3.32 trln versus -$3.58 trln in April.

Looking ahead, investors will receive the preliminary University of Michigan Index of Consumer Sentiment for June on Friday.

Russell 2000 +17.0% YTD
S&P 500 +12.9% YTD
Dow Jones Industrial Average +12.6% YTD
Nasdaq Composite +8.8% YTD

Crude futures settle back above $70 per barrel
10-Jun-21 15:30 ET
Dow +34.93 at 34482.07, Nasdaq +103.02 at 14014.77, S&P +20.00 at 4239.55

[BRIEFING.COM] The S&P 500 is up 0.4% and is still on track to close at a record high. Anything can happen in this final half-hour of action, though.

One last look at the S&P 500 sectors shows the health care (+1.7%), real estate (+0.9%), and information technology (+0.7%) sectors leading the market in gains, while the financials (-0.9%), materials (-0.4%), and industrials (-0.4%) sectors trade lower.

WTI crude futures settled higher by 0.6%, or $0.40, to $70.30/bbl.