US equities stumbled out of the gate on Monday. Despite a strong start and resumption in our trade higher in the early going, stocks ultimately ran out of steam and in the process registered a losing session. The S&P 500 (-0.82%), Dow Industrials (-0.76%) and Nasdaq (-0.71%) all slipped while volume on the NYSE (+0.6%) was flat and lower on the Nasdaq (-2.42%).
We saw a mixed close on Friday coupled with a meaningful uptick in volume which set the stage for yesterday’s pullback. Monday’s Economic data dovetailed cleanly with a market that shifted into stall mode on Friday. The Chicago PMI for February (47.6) came in well below consensus of 52.9. Pending Home Sales for January also missed consensus coming in at -2.5% versus 0.5%. The Pending Home Sales Index Level was 106 versus the prior revised 108.7. Finally, the Dallas Fed Mfg. Survey for February was weaker than expected as well. The Production index was -8.5 and the General Activity Index was -31.8 versus consensus -30.0. All in all, the day’s data was weaker than expected and as a result provided some inertia to lower prices after Friday’s stall.
Today’s economic calendar will be dominated by the PMI Manufacturing Index (51.3 consensus) and by the ISM Mfg. Index (48.5 consensus).
Interestingly, crude oil rallied yesterday, gaining over 3% on the session and though what has been good for crude has also been good for equities over the past several quarters, increasingly there appears to be a decoupling of sorts emerging. In fact, not only did crude rally and equities falter yesterday, the energy sector (-1.53%) also lost ground on the session. The decoupling of crude from equities, if it continues, would be a most welcome development. However, even if that were to materialize as a tradable theme for investors, the impact of crude at these depressed prices will continue to have a lingering impact on equities and the energy sector as both have to contend with the impact of crude pricing on plunging revenue, crippled earnings, dividend cuts and a greatly diminished forecast for the sector for the next twelve months.
In short, even if we see crude continue to stabilize and potentially rally from these levels, equities will reflect the overhang that the oil’s collapse has cast.
flickr photo: F. Berkelaar