Wall Street closes little changed, Microsoft gains
19-Sep-19 16:25 ET
Dow -52.29 at 27094.77, Nasdaq +5.49 at 8182.92, S&P +0.06 at 3006.79
briefing.com
[BRIEFING.COM] The S&P 500 closed unchanged on Thursday in a light volume session. Microsoft (MFST 141.07, +2.55, +1.8%) provided some support for the broader market, but relative weakness in the cyclical sectors dragged on a market that struggled to gain traction throughout the day.
The Dow Jones Industrial Average declined 0.2%, and the Russell 2000 declined 0.4%. The Nasdaq Composite increased 0.1%.
Microsoft announced a $40 billion share repurchase program and raised its quarterly dividend 11%. Shares hit a new all-time high, bringing the company's valuation closer to $1.1 trillion. The S&P 500 utilities sector (+0.4%) almost set a new-all time high while the health care sector (+0.5%) had a rare outperformance.
The rest of the market, though, did not perform as well, even as economic data came in mostly better than expected. The initial weekly claims, Philadelphia Fed Index, and Existing Home Sales upheld the market's improved outlook for U.S. economic growth.
The industrials (-0.5%), financials (-0.4%), and energy (-0.4%) sectors -- which were among this month's leaders -- were today's laggards. Today's session, then, might have had some technical aspects to it while negative-sounding reports lingered in the background.
For instance, the U.S. and China resumed in-person trade talks today, and the initial tone didn't sound too constructive. China's Global Times editor tweeted China is not as anxious to reach a deal as the U.S. expects it to be, while a personal adviser to President Trump, Michael Pillsbury, said the president is ready to escalate the trade war if a deal is not reached soon. Talks will resume tomorrow.
The New York Fed may have also caused some discomfort after it injected another $75 billion into money markets to improve liquidity in the overnight repo market. This was its third repurchase operation this week and another one is reportedly scheduled for tomorrow. Fed Chair Powell said the volatility in the overnight repo market has no implications for the economy or monetary policy.
U.S. Steel (X 11.06, -1.39, -11.2%) disappointed investors after guiding its Q3 EPS well below consensus, making it the third steel company to lower guidance in three days. Darden Restaurants (DRI 120.69, -6.44, -5.1%) lost 5% despite beating earnings estimates.
U.S. Treasuries finished slightly higher, pushing yields lower across the curve. The 2-yr yield and 10-yr yield both declined one basis point to 1.74% and 1.77%, respectively. The U.S. Dollar Index declined 0.2% to 98.35. WTI crude ticked up 0.1%, or $0.05, to $58.12/bbl.
Reviewing Thursday's batch of economic data:
- Existing home sales increased 1.3% month-over-month in August to a seasonally-adjusted annual rate of 5.49 million (Briefing.com consensus 5.36 million) from 5.42 million in July. Total sales were 2.6% higher than the same period a year ago and at their strongest pace since March 2018.
- The key takeaway from the report is that the sales strength was fueled by lower mortgage rates. The August sales strength cut the inventory of homes for sale. That will keep upward pressure on home prices, which in turn is likely going to necessitate the need for mortgage rates to stay down to drive ongoing sales growth.
- Initial claims for the week ending Sept. 14 increased by 2,000 to 208,000 (Briefing.com consensus 213,000) while continuing claims for the week ending Sept. 7 decreased by 13,000 to 1.661 million.
- The key takeaway from this report is that it covers the period in which the survey for the September employment report was conducted, so the low level of initial claims will drive expectations for another solid increase in nonfarm payrolls.
- The Conference Board's Leading Economic Index was unchanged in August (Briefing.com consensus +0.1%) following a downwardly revised 0.4% increase (from 0.5%) in July.
- The key takeaway from the report is that it corroborated known negatives, which included weaker manufacturing activity, declining stock prices, and a flattening/inverted yield curve.
- The Q2 Current Account Deficit narrowed by 5.9% to $128.2 billion (Briefing.com consensus -$135.0 billion).
- The Philadelphia Fed Index for September checked in at 12.0 (Briefing.com consensus 8.0), down from 16.8 previously. Importantly, though, the index shows manufacturing activity in the Philly Fed region is still in an expansion mode.
Investors will not receive any notable economic data on Friday.
- Nasdaq Composite +23.3% YTD
- S&P 500 +19.9% YTD
- Dow Jones Industrial Average +16.2% YTD
- Russell 2000 +15.8% YTD
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