Wall Street closes little changed; trade talks in focus
06-Nov-19 16:20 ET
Dow -0.07 at 27492.60, Nasdaq -24.05 at 8410.63, S&P +2.16 at 3076.78
briefing.com
[BRIEFING.COM] The stock market closed little changed on Wednesday, marking its second straight pause near record highs as investors digested a possible pushback in the timeline for a trade deal. The S&P 500 (+0.1%), Dow Jones Industrial Average (unch), and Nasdaq Composite (-0.3%) closed within 0.3% of their flat lines, while the Russell 2000 (-0.6%) underperformed.
Reuters reported that a "Phase One" trade agreement may not get signed until December, as both sides continue to discuss terms and a venue. The news took the market to session lows, but it didn't get the pullback some had been expecting. This might have been due to expectations for a partial deal to still get signed and a view that there is some pent-up demand among under-allocated investors.
The S&P 500 energy sector, however, did succumb to a 2.3% pullback following disappointing earnings results and guidance from Diamondback Energy (FANG 77.20, -13.03, -14.4%) and a decline in oil prices ($56.35, -0.89, -1.6%). The Philadelphia Semiconductor Index (-0.8%) also gave back some gains in response to Microchip's (MCHP 95.62, -4.40, -4.4%) results and guidance and perhaps amid a more cautious trade outlook.
On the other hand, the financials sector (+0.4%) provided the broader market some influential support. The health care (+0.6%), consumer staples (+0.5%), and real estate (+0.5%) sectors also outperformed, likely benefiting from their defensive-oriented dispositions.
The health care and consumer staples sectors can also credit their relative strength to the gains in CVS Health (CVS 70.93, +3.61, +5.4%), Humana (HUM 304.94, +10.19, +3.5%), and Coty (COTY 13.02, +1.56, +13.6%) following their positive earnings results and encouraging guidance.
In notable M&A activity, Xerox (XRX 37.66, +1.29, +3.6%) is reportedly considering a cash-and-stock bid for HP, Inc. (HPQ 19.57, +1.17, +6.4%). An offer would value HP at a premium at just under $23 per share, according to The Wall Street Journal.
U.S. Treasuries finished the session on a higher note, having received increased demand following the latest trade update. The 2-yr yield declined three basis points to 1.60%, and the 10-yr yield declined five basis points to 1.81%. The U.S. Dollar Index remained little changed at 97.95.
Reviewing Wednesday's economic data, which included preliminary Q3 figures for Productivity and Unit Labor Costs and the weekly MBA Mortgage Applications Index:
- Nonfarm business sector labor productivity declined 0.3% in the third quarter (Briefing.com consensus +1.0%), according to the BLS, after increasing an upwardly revised 2.5% (from 2.3%) in the second quarter. Unit labor costs jumped 3.6% (Briefing.com consensus +2.1%) after increasing a downwardly revised 2.4% (from 2.6%) in the second quarter.
- The key takeaway from the report is that it points to profit margin pressures for businesses with the decline in productivity and the jump in unit labor costs; it is also the first decline in productivity since the fourth quarter of 2015.
- The weekly MBA Mortgage Applications Index ticked down 0.1% following a 0.6% increase in the prior week.
Looking ahead, investors will receive the weekly Initial and Continuing Claims report and the Consumer Credit report for September on Thursday.
- Nasdaq Composite +26.8% YTD
- S&P 500 +22.7% YTD
- Russell 2000 +17.9% YTD
- Dow Jones Industrial Average +17.9% YTD
Market Snapshot
| Dow | 27492.60 | -0.07 | (0.00%) | | Nasdaq | 8410.63 | -24.05 | (-0.29%) | | SP 500 | 3076.78 | +2.16 | (0.07%) | | 10-yr Note | +26/32 | 1.820 |
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| | NYSE | Adv 1298 | Dec 1566 | Vol 988.1 mln | | Nasdaq | Adv 1127 | Dec 1963 | Vol 2.1 bln |
Industry Watch
| Strong: Real Estate, Health Care, Consumer Staples, Financials |
| | Weak: Energy |
Moving the Market
-- Stock market closes little changed for second straight day; holds near record highs
-- Reuters reported that a phase one trade deal may not get signed until December
-- Weakness in the energy sector, which had outperformed this month
-- Relative strength in the defensive-oriented sectors
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