[BRIEFING.COM] What was shaping up to be a respectable bounce after several days of consolidation created a sense that stocks were oversold on a short-term basis lost steam going into the close as inflation fears returned. The Dow failed to reclaim some of the 4.1% it has lost since topping out at a five-year high on May 5th. The Nasdaq fared even worse, relinquishing a 1.2% intraday which would have brought the index close to breakeven for the year before closing at a new six-month low.
Before the bell, stocks regained some upside traction as investors came to the realization that fundamentals haven't changed nearly as much as market sentiment. Despite very little in the way of corporate news and no economic data on the docket to set the tone, the fact that selling has extended beyond a fundamental reaction to an extra 0.1% on the core CPI and left stocks at very reasonable valuations also left many thinking that the market bottom had finally been reached. Nonetheless, some uncertainty ahead of the April core PCE deflator -- another widely watched inflation measure that will hit the wires Friday morning, and ongoing concerns about higher interest rates and rising commodity prices -- both of which address inflation concerns that continue to underscore our Neutral market view -- returned to the forefront of investors' psyches.
To wit, the yield on 10-yr note rebounded to 5.05%, ending a three-day rally in Treasuries that yesterday pushed the 10-yr yield below the psychologically significant 5.00% barrier to hit 4.986% -- the lowest level since late April. The latter took a toll on Utilities, which turned in the day's worst performance since higher bond yields diminished the attraction of dividend paying stocks. The rise in borrowing costs eventually weighed on the Financial sector as well, offsetting renewed momentum in one of the sector's few bright spots -- Fannie Mae (FNM 50.86 +0.59). The mortgage lender gained 1.0% after the release of a report compiled by the Office of Federal Housing Enterprise Oversight was billed as a step in the right direction.
On the commodity price front, oil prices surged 2.6% and climbed back above $71 a barrel, which renewed some influential leadership in Energy to the tune of more than 2.5% intraday; but that wasn't enough to prevent late afternoon profit-taking which left the sector flat on the day. Also initially benefiting from the sense that ongoing consolidation in commodities was overdone was Materials, which was up more than 2.0% at one point as copper soared 12% to post its best one-day gain ever and gold traded higher for the first time in five days. When it was all said and done, however, what had acted as sources of early support quickly became apparent as sources of nervousness with regard to the direction of Fed policy.
Also weighing on the proceedings was the influential Technology sector's inability to hold onto modest recovery efforts, as evidenced by the tech-heavy Nasdaq totally erasing an early gain of 1.2% to eventually leading the way lower among the majors. The biggest drag on the sector was further deterioration in the Semiconductor group, which was up 1.4% before completely rolling over into the close to finish down 1.6% and extend its year-to-date decline to more than 3.0%. NYSE Adv/Dec 1477/1776...Nasdaq Adv/Dec 1352/1700
DOW Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)