Stocks Lower As Markets Sort Through a Range of Data…..

U.S. stocks closed lower following yesterday’s rally that boosted the S&P 500 back to record high territory, following decisively-positive COVID-19 vaccine results. Today’s pullback came amid a plethora of data from both corporate and economic reports, as well as a speech from Federal Reserve Chairman Powell. In his speech, Chairman Powell echoed much of what had been said following the FOMC meeting, but also highlighted that the Fed would not be putting away its emergency tools anytime soon. Meanwhile, retail sales slowed more than expected and import prices were cooler than forecasted, however industrial production and business inventories rose more than projected and homebuilder sentiment surprisingly posted a new record high. On the corporate front, earnings results from Dow members Walmart and Home Depot fostered mixed responses, Tesla rallied ahead of being added to the S&P 500 next month, launched a digital pharmacy, and Costco Wholesale announced a special cash dividend of $10 per share. Treasury yields declined as bond prices rose, and the U.S. dollar saw pressure. Gold was down and crude oil prices were higher. Asia finished mixed, and Europe diverged after a recent run and also closed mixed.

The Dow Jones Industrial Average lost 167 points (0.6%) to 29,783, the S&P 500 Index was down 17 points (0.5%) at 3,610, and the Nasdaq Composite declined 25 points (0.2%) to 11,899. In heavy volume, 955 million shares were traded on the NYSE and 3.7 billion shares changed hands on the Nasdaq. WTI crude oil traded $0.09 higher at $41.43 per barrel and wholesale gasoline was little changed at $1.15 per gallon. Elsewhere, the Bloomberg gold spot price was off $7.75 to $1,881.20 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—fell 0.2% to 92.44.

Retail sales miss, import prices subdued, but industrial production and housing data upbeat

Advance retail sales for October increased 0.3% month-over-month (m/m), below the Bloomberg forecast of a 0.5% increase following September’s downwardly-adjusted 1.6% gain. Last month’s sales ex-autos rose 0.2% m/m, compared to expectations of a 0.6% rise and September’s negatively-revised 1.2% gain. Sales ex-autos and gas were up 0.2% m/m, compared to estimates of a 0.6% increase, and September’s reading was adjusted downward to a 1.2% rise. The control group, a figure used to calculate GDP, ticked 0.1% higher m/m, south of projections of a 0.5% increase and versus September’s negatively-adjusted 0.9% increase.

The Federal Reserve’s industrial production rose 1.1% m/m in October, just above estimates of a 1.0% gain, and versus September’s favorably-revised 0.4% decrease. Manufacturing output rose solidly and utilities production jumped, while mining output declined. Capacity utilization increased to 72.8% from the prior month’s upwardly-revised 72.0% rate, compared to forecasts of 72.3%. Capacity utilization is 7.0 percentage points below its long-run average, but 8.6 percentage points north of the low set in April.

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment in November unexpectedly improved to another record high, jumping to 90, versus forecasts calling for it to match October’s 85 level. A level north of 50 depicts positive conditions. The index notched a record high for the third month in a row and the NAHB noted that this reflects that housing is a bright spot for the economy. “However, affordability remains an ongoing concern, as construction costs continue to rise and interest rates are expected to move higher as more positive news emerges on the coronavirus vaccine front,” the NAHB added.

Business inventories rose 0.7% m/m in September, versus forecasts calling for a 0.6% increase, and compared to August’s unadjusted 0.3% gain.

The Import Price Index dipped 0.1% m/m for October, versus expectations of a flat reading, and compared to September’s downwardly-revised 0.2% gain. Compared to last year, prices were down 1.0%, versus forecasts of a 0.8% decrease and a slight recovery from September’s negatively-revised 1.4% fall.

Treasuries rose, with the yield on the 2-year note little changed at 0.17%, while the yield on the 10-year note decreased 4 bps to 0.87%, and the yield on the 30-year bond fell 5 bps to 1.62%.

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