Stock Market Update

[BRIEFING.COM] The S&P 500 lost 0.8% on Monday for its fifth straight decline, as weakness in the growth stocks outweighed relative strength in the value/cyclical stocks. The Nasdaq Composite dropped 2.5%, and the Russell 2000 declined 0.7%. The Dow Jones Industrial Average (+0.1%), however, eked out a gain.  

Valuation angst lingered after the 10-yr yield touched 1.39% in overnight action on the prevailing view that additional fiscal stimulus and reopening/vaccination efforts will spur growth and inflation. Considering the 10-yr yield started the month at 1.09%, this speedy ascent continued to undercut risk sentiment for growth stocks with elevated valuations. 

Those were typically found in the Nasdaq, the S&P 500 information technology (-2.3%) and consumer discretionary (-2.2%) sectors, and the Philadelphia Semiconductor Index (-3.8%). Shares of Tesla (TSLA 714.50, -66.80, -8.6%) dropped nearly 9%.

The 10-yr yield finished the session one basis point higher at 1.36%. The 2-yr yield remained flat at 0.11%. The U.S. Dollar Index decreased 0.3% to 90.12.

Interestingly, six of the 11 S&P 500 sectors still closed in positive territory, and the iShares Russell 1000 Value ETF (IWD 145.57, +0.57, +0.4%) closed at a record high. Financial stocks have the biggest weighting in this ETF, and they directly benefited from the minor curve-steepening activity.

The S&P 500 financials sector advanced 1.0%, but the energy sector (+3.5%) noticeably outperformed with a 3.5% gain amid sharply higher oil prices ($61.63, +2.63, +4.5%). 

Other cyclical stocks were supported by analyst upgrades. For example, the U.S. Global Jets ETF (JETS 25.68, +0.86, +3.5%) rose 3.5% after Deutsche Bank upgraded many of the airline stocks to Buy from Hold, and Dow Inc. (DOW 62.48, +2.09, +3.5%) provided influential leadership in the materials sector (+0.4%) after BofA Securities upgraded it to Neutral from Underperform.

Boeing (BA 212.88, -4.59, -2.1%) was a notable exception to the reopening trade after a Pratt & Whitney engine in one of its 777 planes caught fire over the weekend. Note, Pratt & Whitney is a subsidiary of Raytheon Technologies (RTX 73.00, -1.26, -1.7%), and no passenger died in the event. 

Reviewing Monday's economic data:

• The Conference Board's Leading Economic Index (LEI) increased 0.5% m/m in January (Briefing.com consensus 0.4%) following an upwardly revised 0.4% increase (from 0.3%) in December. January marked the ninth consecutive monthly increase.
  • The key takeaway from the report is that the strength in component indicators was widespread, with seven of the 10 indicators making positive contributions. 

Looking ahead, investors will receive the Conference Board's Consumer Confidence Index for February, the FHFA Housing Price Index for February, and the S&P Case-Shiller Home Price Index for December on Tuesday.

• Russell 2000 +14.0% YTD
• Nasdaq Composite +5.0% YTD
• S&P 500 +3.2% YTD
• Dow Jones Industrial Average +3.0% YTD