By Nicholas Jasinski |
Wednesday, April 5
Jitters. Investors played
defense for a second straight day. Bond yields fell as their prices rose, and
the safest stocks in the market rallied.
It was a similar story to yesterday: The
latest U.S. economic data came in relatively weak, and growth concerns drove a
flight to safety. A month ago, markets were in a good-news-is-bad-news mood: A
slowing economy meant a less aggressive Federal Reserve, lower bond
yields, and higher stock valuations.
Now, the end of interest-rate increases
appears to be in sight and bond yields have already dropped sharply to reflect
that, boosting growth stocks most of all (more on that below). These days, bad
news about the economy is simply bad news that means likely lower corporate
earnings and less tolerance for risk by investors. Bond yields are still
falling, but the daily moves lower are much smaller than a few weeks ago.
The day's data included ADP's
National Employment Report for March, which showed an
increase of 145,000 private payrolls—worse than the 200,000 expected and down
from February's reading of 261,000. It's a preview of Friday's government data
on March hiring.
The Institute for Supply Management also
released its Services Purchasing Managers’ Index for
March this morning. That index fell to 51.2, from 55.1 a month earlier. It's
still above the expansionary level of 50, but is among the lowest readings in
the past two years and widely missed the 54.4 consensus estimate among
economists.
And the drop came from a concerning source:
The new orders component of the index tumbled to 52.2, from 62.6. That
suggests weaker demand and a souring outlook.
Investors chose to hide out in bonds and
defensive stock sectors. The yield on the 10-year U.S.
Treasury note fell 0.1 percentage point today, to 3.29%—its
lowest yield since September and the sixth-straight decline.
Utilities stocks in the S&P 500 jumped a
collective 2.6% today, while health care stocks added 1.7%. More
demand-dependent consumer discretionary stocks were the biggest losers, down
2.1%.
The overall S&P
500 declined 0.2% today and the Nasdaq
Composite slid 1.1%. The Dow
Jones Industrial Average managed a 0.2% gain, helped by good
days from components UnitedHealth Group (+3.2%), Johnson
& Johnson (+4.5%), Amgen (+2.4%) and Merck
(+2.8%).
DJIA: +0.24% to 33,482.72
S&P 500: -0.25% to 4,090.38
Nasdaq: -1.07% to 11,996.86
The Hot Stock:
Phillips 66 +6.3%
The Biggest Loser: MarketAxess Holdings -13.9%
Best Sector: Utilities +2.6%
Worst Sector: Consumer Discretionary -2.1%
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