Mixed Signals

By Matthew Klein |  Friday, October 16

Roller-Coaster. The S&P 500 index of large-cap U.S. stocks ended the day almost exactly where it began, gaining just 0.01%. But that belies what happened today, with big gains early in the day wiped out by large losses heading into the close. Some sectors—utilities, health care, industrials, and materials—did well, gaining about 1% on the day, while others, particularly energy and consumer discretionary, fell sharply. Overall, 262 components rose, while 233 fell.

The biggest winners included General Electric (up 6%), Pfizer (up 4%), Alaska Air Group (up 3.5%), and General Motors (up 3%). The biggest losers were overwhelmingly concentrated in energy, with 15 of the worst 20 stocks in oil and gas, including Schlumberger (down 9%), Halliburton (down 6%), Devon Energy, Occidental Petroleum, HollyFrontier, and Marathon Oil (all down 5%). But the single worst stock of the day was J.B. Hunt Transportation Services, which lost 10%. C.H. Robinson, another trucking and logistics company, was also down almost 5%.

Interestingly, the losses in the energy sector weren’t mirrored by changes in the price of oil or gas, which were both close to flat on the day. Gold, silver, and copper prices were essentially flat, as was the dollar. As has been the case for the past several months, yields on U.S. Treasury debt were effectively unchanged. Both the Russell 2000 small-cap index and the tech-heavy Nasdaq Composite underperformed the S&P 500, each falling somewhere between 0.3% and 0.4%. European stocks, on the other hand, had a banner day, with the STOXX 600 index up 1.3% and France’s CAC-40 up more than 2%. The Hang Seng was also up about 1% but most other markets in Asia were down, as was Canada’s TSX.

The main news of the day came from two conflicting economic indicators: The retail sales numbers for September published by the Census Bureau and the industrial production and capacity data for September compiled by the Federal Reserve.

The consumer data were extremely encouraging, with American spending on goods (excluding gasoline and groceries), bars, and restaurants up more than 2%. Overall retail and food services spending was substantially higher in September than it was before the pandemic.

But the output data painted a picture of a recovery that's stalled. Industrial production (excluding energy extraction, refining, and distribution) fell slightly, despite a big gain in aircraft and parts manufacturing. While a big drop in motor vehicle and parts production was to blame, the slowdown was broad-based across a range of manufactured products, including machinery and electrical equipment.

For more on the data, read my thoughts on Barrons.com.

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