Stock Market Update

[BRIEFING.COM] Today's trade was somewhat mixed with investors lacking conviction in front of tomorrow's Thanksgiving closure. The S&P 500 dropped 0.4%, the Nasdaq Composite declined 0.6%, and the Dow Jones Industrial Average logged a 0.3% decline, yet market breadth was positive. 

Advancers led decliners by a 3-to-2 margin at the NYSE and by a 4-to-3 margin at the Nasdaq. Small cap stocks were favored, leading the Russell 2000 to close 0.1% higher, while money rotated away from mega caps, technology stocks, and chipmakers. This rotation has been a consistent theme throughout November, contributing to a 10.5% gain for the small-cap index since October. The market-cap weighted S&P 500 sits on a 5.1% gain this month. 

The outperformance of the small cap index was attributed in part to economic data this morning that was largely favorable for the U.S. growth outlook. Meanwhile, the weakness in technology names followed disappointing earnings reports and/or guidance from companies such as Dell (DELL 124.38, -17.36, -12.3%), Autodesk (ADSK 290.64, -27.32, -8.6%), CrowdStrike (CRWD 347.56, -16.71, -4.6%), and Workday (WDAY 253.40, -16.79, -6.2%). Additionally, some of the weakness in tech stocks reflects profit-taking, as many companies in the sector have posted substantial gains since the beginning of the year.

This morning's data featured a PCE price inflation that was a bit sticky in October above the Fed's 2.0% target, but real disposable personal income increased 0.4%, weekly initial jobless claims were encouraging with a low reading of just 213,000, and pending home sales jumped 2.0% in October.

Treasuries settled with gains in response to the data, and in reaction to today's strong $44 billion 7-yr note auction. The 10-yr yield dropped six basis points to 4.24% and the 2-yr yield dropped four basis points to 4.21%.

The aforementioned weakness in technology names led the S&P 500 information technology sector to close 1.2% lower. On the flip side, the drop in rates contributed to the move in the real estate sector, which logged a 0.7% gain.

• Nasdaq Composite: +27.0%
• S&P 500: +25.8%
• S&P Midcap 400: +20.9%
• Russell 2000: +19.7%
• Dow Jones Industrial Average: +18.7%

Reviewing today's economic data:

• Weekly MBA Mortgage Applications Index 6.3%; Prior 1.7%
• October Personal Income 0.6% (Briefing.com consensus 0.3%); Prior 0.3%, October Personal Spending 0.4% (Briefing.com consensus 0.2%); Prior was revised to 0.6% from 0.5%, October PCE Prices 0.2% (Briefing.com consensus 0.2%); Prior 0.2%, October PCE Price - Core 0.3% (Briefing.com consensus 0.3%); Prior 0.3%
  • The key takeaway from the report is the absence of disinflation in the PCE price indexes on a year-over-year basis. That wasn't necessarily a surprise given that the monthly readings were in-line with estimates, yet it will keep the Fed inclined to take a more gradual approach to cutting the target range for the fed funds rate.
• Weekly Initial Claims 213K (Briefing.com consensus 217K); Prior was revised to 215K from 213K, Weekly Continuing Claims 1.907 mln; Prior was revised to 1.898 mln from 1.908 mln
  • The key takeaway from the report is the much the same: employers are reluctant to let employees go, but for employees let go it is becoming more challenging to find a new job.
• October Durable Orders 0.2% (Briefing.com consensus 0.4%); Prior was revised to -0.4% from -0.8%, October Durable Goods - ex transportation 0.1% (Briefing.com consensus 0.3%); Prior 0.4%
  • The key takeaway from the report is that it showed some softness in business spending in October, evidenced by a 0.2% decline in new orders for nondefense capital goods excluding aircraft -- a proxy for business spending.
• October Adv. Intl. Trade in Goods -$99.1 bln; Prior was revised to -$108.7 bln from -$108.2 bln
• October Adv. Retail Inventories 0.1%; Prior was revised to 0.6% from 0.8%
• October Adv. Wholesale Inventories 0.2%; Prior was revised to -0.2% from -0.1%
• Q3 GDP - Second Estimate 2.8% (Briefing.com consensus 2.8%); Prior 2.8%, Q3 GDP Deflator - Second Estimate 1.9% (Briefing.com consensus 1.8%); Prior 1.8%
  • The key takeaway from the report is that there was a modest downward revision to personal consumption expenditures, yet that did not alter the fact that personal spending was quite healthy in the third quarter.
• November Chicago PMI 40.2 (Briefing.com consensus 45.0); Prior 41.6
• October Pending Home Sales 2.0% (Briefing.com consensus -1.5%); Prior was revised to 7.5% from 7.4%