Stock Market Update

[BRIEFING.COM] The stock market closed lower at the index level. The Russell 2000 underperformed, dropping 1.2%, while the S&P 500 (-0.4%), Nasdaq Composite (-0.3%), and Dow Jones Industrial Average (-0.6%). Many names participated in a broad retreat, leading the equal-weighted S&P 500 to decline 0.8%.

NVIDIA (NVDA 130.39, -1.61, -1.2%) underperformed again along with other chipmakers. Broadcom (AVGO 240.23, -9.77, -3.9%) logged a 4% decline and the PHLX Semiconductor Index (SOX) closed 1.6% lower. Gains in Apple (AAPL 253.48, +2.44, +1.0%), Microsoft (MSFT 454.46, +2.87, +0.6%), and Tesla (TSLA 479.86, +16.84, +3.6%), which constitute 16% of the S&P 500, provided some offsetting support to the broader market.

UnitedHealth (UNH 485.52, -12.98, -2.6%) was another influential laggard, along with managed care stocks with pharmacy benefit manager divisions like CVS (CVS 44.04, -2.56, -5.5%). This selling followed comments from President-elect Trump yesterday that he wants to "knock out the drug industry middle man" contributing to higher drug prices.

The 10-yr note yield, which was at 4.44% in front of this morning's data, settled two basis points lower than yesterday at 4.38%. The 2-yr yield, which was at 4.28% before 8:30 ET, settled unchanged from yesterday at 4.24%.

This price action followed the November retail sales report, which showed a soft 0.2% increase in sales, excluding autos. That line item was viewed as a sign of softening in consumer spending activity since the report is not adjusted for price changes, meaning there wasn't any real pickup in volume/demand driving the increase. Also, the $13 billion 20-yr bond reopening was met with relatively weak demand.

• Nasdaq Composite: +34.0% YTD
• S&P 500: +26.9% YTD
• S&P Midcap 400: +16.4% YTD
• Russell 2000: +15.2% YTD
• Dow Jones Industrial Average: +15.3% YTD

Reviewing today's economic data:

• November Retail Sales 0.7% (Briefing.com consensus 0.5%); Prior was revised to 0.5% from 0.4%, November Retail Sales ex-auto 0.2% (Briefing.com consensus 0.4%); Prior was revised to 0.2% from 0.1%
  • The key takeaway from the report is in the ex-auto number, which was up modestly and a reflection of some softening spending activity given that it is not adjusted for price changes. In other words, the overall sales increase, excluding autos, appears to be more price driven than volume driven.
• November Industrial Production -0.1% (Briefing.com consensus 0.3%); Prior was revised to -0.4% from -0.3%, November Capacity Utilization 76.8% (Briefing.com consensus 77.3%); Prior was revised to 77.0% from 77.1%
  • The key takeaway from the report is that industrial production didn't show any strong rebound from the prior two months that were adversely impacted by the hurricanes. There was some modest strength in manufacturing output, but total industrial production is still lagging.
• October Business Inventories 0.1% (Briefing.com consensus 0.2%); Prior was revised to 0.0% from 0.1%
• December NAHB Housing Market Index 46 (Briefing.com consensus 47); Prior 46

Looking ahead, market participants receive the following data tomorrow:

• 07:00 ET: MBA Mortgage Applications Index (prior 5.4%)
• 08:30 ET: November Housing Starts (Briefing.com consensus 1347K; prior 1311K) and Building Permits (Briefing.com consensus 1430K; prior 1416K)
• 08:30 ET: Q3 Current Account Balance (Briefing.com consensus -$283.0B; prior -$266.8B)
• 10:30 ET: EIA Crude Oil Inventories (prior -1.43M)