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Market Snapshot

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Dow 35897.64 -29.79 (-0.08%)
Nasdaq 15180.42 -385.15 (-2.47%)
SP 500 4668.67 -41.18 (-0.87%)
10-yr Note +3/32 1.424
NYSE Adv 1494 Dec 1775 Vol 1.1 bln
Nasdaq Adv 1557 Dec 2890 Vol 4.8 bln

Industry Watch
Strong: Energy, Materials, Financials, Health Care, Consumer Staples
Weak: Information Technology, Consumer Discretionary

Moving the Market

-- Mega-caps/growth stocks fumble post-FOMC gains while value stocks rise

-- Adobe (ADBE) sinks on disappointing earnings news

-- 2-yr yield drops, outpaces decline in 10-yr yield

Mega-caps reverse course and drag market lower
16-Dec-21 16:15 ET
Dow -29.79 at 35897.64, Nasdaq -385.15 at 15180.42, S&P -41.18 at 4668.67

[BRIEFING.COM] The S&P 500 fell 0.9% on Thursday, as the mega-caps fumbled their post-FOMC gains and dragged the benchmark index lower in a steady retreat. The Nasdaq Composite (-2.5%) and Russell 2000 (-2.0%) saw steeper declines, while the Dow Jones Industrial Average outperformed on a relative basis with a 0.1% decline.

The market had a bullish tone in the pre-market session, but that started to unwind after Adobe (ADBE 566.09, -64.24, -10.2%) issued downside guidance for fiscal Q1 and FY22. ADBE shares dropped 10%, and the lack of dip-buying efforts appeared to weigh on sentiment and other growth stocks with high valuations.

Moreover, the pace and ease at which the growth stocks retreated supported suspicions that yesterday's rally was fueled by short-covering activity. The heavily-weighted S&P 500 information technology (-2.9%) and consumer discretionary (-2.2%) sectors tumbled 3% and 2%, respectively.

The value-oriented stocks, though, extended gains. It's just that the mega-cap losses diminished their positive influence. Eight of the 11 S&P 500 sectors, including financials (+1.2%), materials (+1.0%), and energy (+0.7%), closed higher. The Russell 1000 Value Index gained 0.5%.

The financials sector drew support from the curve-steepening activity in the Treasury market, driven by a steeper decline in shorter-dated yields versus longer-dated yields. The 2-yr yield decreased six basis points to 0.61%, and the 10-yr yield decreased four basis points to 1.42%. The U.S. Dollar Index fell 0.6% to 95.98.

The gains in the cyclical sectors, the curve-steepening activity, and even an increase in oil prices ($72.36/bbl, +1.47, +2.1%) indicated that growth concerns weren't a driving force in today's index declines.

On a related note, housing starts and building permits for November were better than expected, and while weekly initial claims were higher than expected (206,000), the four-week moving average (203,750) declined to its lowest level since Nov. 15, 1969.

In light of the Fed's decision yesterday, other central bank meetings received additional attention. The Bank of England increased its bank rate by 15 basis points to 0.25% in a surprise move while the European Central Bank left rates unchanged, as expected, and announced a further tapering of asset purchases.

Reviewing Thursday's economic data:

Housing starts in November increased 11.8% month-over-month to a seasonally adjusted annual rate of 1.679 million units (Briefing.com consensus 1.570 million) while building permits rose 3.6% to 1.712 million (Briefing.com consensus 1.670 million).
The key takeaway from this report was the strength seen in single-unit activity for both starts (+11.3%) and permits (+2.7%), as new supply is greatly needed in a tight and increasingly cost-prohibitive housing market.
Initial jobless claims for the week ending December 11 were a bit higher than expected, increasing by 18,000 to 206,000 (Briefing.com consensus 195,000), but still holding at a relatively low and encouraging level. Continuing claims for the week ending December 4 decreased by 154,000 to 1.845 million, which is the lowest since March 14, 2020.
The key takeaway from the report is the understanding that the four-week moving average for initial claims (203,750) is the lowest since November 15, 1969.
Total industrial production increased 0.5% in November (Briefing.com consensus +0.8%) following an upwardly revised 1.7% increase (from 1.6%) in October. The capacity utilization rate rose to 76.8% (Briefing.com consensus 76.8%) from an upwardly revised 76.5% (from 76.4%) in October.
The key takeaway from the report is that it points to plenty of latent growth potential when the semiconductor supply shortage, and other supply chain issues, can get worked out.
The Philadelphia Fed Index for December dropped to 15.4 (Briefing.com consensus 30.0) from 39.0 in November.
The preliminary IHS Markit Services PMI decreased to 57.5 from the final reading of 58.0 in November. The preliminary IHS Markit Manufacturing PMI decreased to 57.8 from the final reading of 58.3 in November.

There is no economic data scheduled for Friday.

S&P 500 +24.3% YTD
Nasdaq Composite +17.8% YTD
Dow Jones Industrial Average +17.3% YTD
Russell 2000 +9.0% YTD

WTI crude futures settle higher by 2%
16-Dec-21 15:30 ET
Dow +36.03 at 35963.46, Nasdaq -356.51 at 15209.06, S&P -33.22 at 4676.63

[BRIEFING.COM] The S&P 500 is down 0.7% to trade off prior lows (-1.2%).

One last look at the sectors shows information technology (-2.8%), consumer discretionary (-1.8%), and communication services (-0.3%) as the only sectors trading lower. The financials (+1.4%) and materials (+1.1%) are atop the standings with gains over 1.0%.

WTI crude futures settled higher by 2.1%, or $1.47, to $72.36/bbl.