Technology Stocks : Wennerstrom Semi Equipment Analysis
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To: Sam who wrote (78066)12/6/2017 8:21:15 PM
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Donald Wennerstrom
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Flat Finish Despite Tech Bounce Back
06-Dec-17 16:25 ET
Dow -39.73 at 24140.91, Nasdaq +14.16 at 6776.36, S&P -0.30 at 2629.27

[BRIEFING.COM] Equity indices finished roughly flat on Wednesday despite strength in technology shares.

The S&P 500 finished a tick below its unchanged mark, extending its losing streak to four sessions in a row. Meanwhile, the Dow Jones Industrial Average lost 0.2% and the tech-heavy Nasdaq added 0.2%. Small caps underperformed in the midweek session, pushing the Russell 2000 lower by 0.5%.

The top-weighted technology sector was a focal point on Wednesday as technology shares, which have paced this year's rally, have recently fallen victim to an end-of-the-year sector rotation; the tech space lost 2.6% last Wednesday and another 1.9% on Monday.

In addition, the group disappointed with its performance on Tuesday as it failed to protect a solid opening gain.

Nevertheless, the technology sector did not disappoint on Wednesday. The group opened relatively flat, but strengthened throughout the session to finish with a gain of 0.8%. Heavyweights like Facebook (FB 176.06, +3.23), Alphabet (GOOG 1018.38, +13.23), and Microsoft (MSFT 82.78, +1.19) added between 1.3% and 1.9%.

However, it's worth noting that Apple (AAPL 169.01, -0.63) struggled (-0.4%), finishing lower for the fifth session in a row.

The consumer staples (+0.6%), utilities (+0.4%), real estate (+0.2%), and industrials (+0.1%) groups also finished Wednesday in the green, but losses from the health care (-0.1%), financials (-0.3%), consumer discretionary (-0.5%), materials (-0.6%), telecom services (-1.0%), and energy (-1.3%) sectors roughly balanced the gains.

Energy shares showed particular weakness as the price of crude oil fell to its lowest level in more than two weeks; West Texas Intermediate crude futures tumbled 2.9% to $55.95 per barrel. On a related note, the Department of Energy reported that U.S. crude stockpiles decreased by 5.6 million barrels last week, while the consensus estimate expected a draw of 2.5 million barrels.

Corporate news didn't have much impact at the macro level, but it did cause some notable movement in individual stocks.

DaVita (DVA 69.20, +8.27) jumped 13.6% after agreeing to sell its DaVita Medical Group unit to UnitedHealth's (UNH 219.94, -0.15) Optum for approximately $4.9 billion in cash. Vera Bradly (VRA 11.03, +2.39) surged 27.7% after reporting above-consensus earnings and issuing upbeat profit guidance for the holiday season.

In the bond market, U.S. Treasuries rallied on Wednesday, sending yields lower across the curve. The yield on the benchmark 10-yr Treasury note dropped three basis points to 2.33%, while the 2-yr yield also lost three basis points, settling at 1.80%.

Elsewhere, European equities finished the midweek session mixed, while the major Asian indices moved broadly lower. Japan's Nikkei dropped 2.0%, marking its biggest one-day drop since March, while Hong Kong's Hang Seng lost 2.1%, which is its worst one-day decline in 13 months.

Reviewing Wednesday's batch of economic data, which included the ADP Employment Change Report for November, the revised readings for third quarter Productivity and Unit Labor Costs, and the weekly MBA Mortgage Applications Index:

  • The ADP National Employment Report showed an increase of 190,000 in November ( consensus 190,000). The October reading was left unrevised at 235,000.
    • The ADP reading precedes Friday's more influential Employment Situation Report for November ( consensus +190K).
  • Third quarter unit labor costs were revised downward to -0.2% ( consensus +0.2%) from +0.5% in the preliminary reading. Meanwhile, second quarter productivity was left unrevised at 3.0% ( consensus +3.3%).
    • The key takeaway from the report is that the productivity increase was the largest since the third quarter of 2014, yet labor costs continue to be subdued.
  • The weekly MBA Mortgage Applications Index increased 4.7% to follow last week's 3.1% decrease.
On Thursday, investors will receive November Challenger Job Cuts at 7:00 ET, weekly Initial Claims ( consensus 240K) at 8:30 ET, and October Consumer Credit ( consensus $17.0 billion) at 15:00 ET.

  • Nasdaq Composite +25.9% YTD
  • Dow Jones Industrial Average +22.2% YTD
  • S&P 500 +17.4% YTD
  • Russell 2000 +11.2% YTD
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