Closing Summary: Stocks End Flat After ECB Stands Pat The stock market ended the Thursday session on a modestly lower note ahead of Fridays Nonfarm Payrolls report for November. The S&P 500 shed 0.1% while the Russell 2000 (-0.5%) underperformed. Thursday served as a perfect reminder for how dependent global equity markets have become on central bank stimulus. The first reminder occurred during the Asian session with Chinas Shanghai Composite soaring 4.3% amid expectations the Peoples Bank of China will introduce additional stimulus measures. While todays advance was impressive, it pales in comparison with an 18.3% surge in the index since November 20. Meanwhile, the second reminder manifested itself through volatility in European and U.S. markets in reaction to the European Central Banks latest policy statement and subsequent press reports. As expected, the ECB made no changes to its interest rate corridor, but more notably, President Mario Draghi did not call for the start of a sovereign QE program, which had been expected by some. Instead, Mr. Draghi said the economic situation in the eurozone will be reassessed early next year. Furthermore, the ECB lowered its 2015 GDP projection to 1.0% from 1.6% and cut its harmonized inflation forecast for the region to 0.7% from 1.1%. The absence of a QE announcement gave a boost to the euro while pressuring European and U.S. stocks. However, U.S. equities were able to string together a rebound after markets in Europe closed for the day. That recovery was capped with the S&P 500 spiking into the green just after 12:30 ET when Bloomberg reported the European Central Bank will prepare a broad-based QE package for the January meeting. In a way, preparations for such a program should be expected even if no announcement is made in January and it is worth pointing out that Mr. Draghi was pressed to define ‘early during his press conference, to which he responded, Early, it means early, it doesnt mean the next meeting. The vague report knocked the euro off its high to 1.2380 against the dollar after the single currency tested the 1.2455 level in the morning. Conversely, the Dollar Index (88.62, -0.33) halved its loss to 0.4%. Although the early afternoon rebound sent the benchmark index back to its flat line, the S&P 500 was unable to extend that move. The index spent the next two hours within a point of unchanged before sliding away from its flat line into the close. Once again, an ECB-related report was cited for the afternoon weakness after Germanys Die Welt reported Mr. Draghi no longer enjoys majority support on the Executive Board. Eight sectors finished in the red with energy (-0.9%) spending the day at the bottom of the leaderboard. The sector slumped as crude oil surrendered 0.8% to $66.75/bbl, but despite the decline, the energy sector will enter Friday with a week-to-date gain of 2.4% versus a slim 0.2% uptick for the S&P 500. Outside of energy, telecom services (-0.2%) and industrials (-0.5%) were the only two groups unable to keep pace with the market. The industrial sector followed its top component—General Electric (GE 26.09, -0.29)—lower, while transport stocks held up relatively well with the Dow Jones Transportation Average ending in-line with the market. Elsewhere, the consumer discretionary sector also finished in-line with the S&P 500, but retail stocks were pressured after Aeropostale (ARO 2.48, -0.71), Express (EXPR 13.19, -1.30), Guess? (GES 20.07, -2.10), and PVH (PVH 122.68, -1.72) disappointed with their earnings and/or guidance. The four names lost between 1.4% and 22.3% while the SPDR S&P Retail ETF (XRT 92.73, -0.64) fell 0.7%. On the upside, financials (+0.1%), materials (+0.3%), and technology (+0.1%) registered modest gains. Notably, the tech sector received a measure of support from the PHLX Semiconductor Index, which added 0.1%. Shares of Avago Technologies (AVGO 103.07, +7.94) spiked 8.4% and were responsible for the bulk of the uptick in reaction to strong quarterly results and guidance. Treasuries ended on their highs with the 10-yr yield sliding four basis points to 2.24%. Participation was a bit below average with just over 780 million shares changing hands at the NYSE floor.
Posted on: Fri, 05 Dec 2014 02:12:05 +0000
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