The major averages ended on their lows as afternoon selling caused the S&P
500 to settle lower by 1.4%.
Equities saw losses in the opening minutes of the session as cautious overseas action kept buyers at bay. Contributing to the overseas softness was chatter questioning the strength of tonight's manufacturing PMI report out of China.
Shortly after the open, the key indices were able to erase most of their early losses in reaction to a pair of better-than-expected economic data points.
The Chicago PMI jumped to its highest level since March 2012 as the May print of 58.7 followed April's contractionary reading of 49.0. The large increase was fueled by an improvement in all of the key subcomponents as employment, order backlogs, production, and new orders all posted notable gains.
Separately, the final reading of the May University of Michigan Consumer Sentiment Survey moved up to 84.5, its best level since July 2007. The Briefing.com consensus expected no change from the preliminary reading of 83.7.
The positive surprises gave a brief boost to equities, but failed to spark a sustained rally as the major averages hovered near yesterday's closing levels until late afternoon selling took hold.
All ten sectors settled in the red as two defensive groups, consumer staples and health care, led to the downside. Most staple components registered losses and Dow member Procter & Gamble (PG 76.80, -2.29) fell 2.9%. Consumer staples endured selling pressure throughout the week as the group declined 3.2%, which erased its May gain.
Elsewhere, the health care sector fell 2.2% and trimmed its year-to-date gain to 20.1%, surrendering its spot atop this year's sector leaderboard to financials.
Financials were mixed in early action until afternoon selling splashed the component list with a wide-ranging shade of red, leaving Morgan Stanley (MS 25.90, +0.08) as the lone advancer. Even with today's 1.6% loss, the financial sector ended the week with a gain of 5.9%.
Technology stocks also enjoyed a strong week, but unlike financials, the group held up relatively well through the selloff. The relative strength of major components like Apple (AAPL 449.74, -1.84), IBM (IBM 208.02, -1.34), and Intel (INTC 24.28, +0.07) overshadowed the weakness in biotechnology and chipmakers. The iShares Nasdaq Biotechnology ETF (IBB 179.50, -3.73) fell 2.0% while the PHLX Semiconductor Index shed 1.2%.
Today's afternoon selling caused the CBOE Volatility Index (VIX 16.25, +1.72) to jump to its highest level since April 19 as market participants raised their near-term volatility expectations.
Looking at today's remaining economic data reveals a disappointment in the Personal Income and Spending report for April. Income was flat and spending declined 0.2% while the Briefing.com consensus expected both measures to be up 0.1%. Core PCE was also flat compared to a 0.1% increase in March.
Personal income for March was revised up to 0.3% from 0.2% while spending was revised down to 0.1% from 0.2%.
On Monday, April construction spending and the May ISM Index will be released at 10:00 ET while auto and truck makers will be reporting their May sales throughout the day.
Week in Review: Choppy Week Leaves S&P in the Red
On Monday, equity and bond markets were closed in observance of Memorial Day.
Tuesday ended with solid gains for the major indices as the Dow Jones Industrial Average logged its 20th consecutive advance on a Tuesday. The early action saw nine of ten sectors register gains of at least 1.0%. However, the defensively-geared utilities spent the entire day in negative territory before ending lower by 1.2%. A Deutsche Bank downgrade of Exelon (EXC 31.34, -0.16) weighed on the rate-sensitive sector, which extended its May loss to 7.8%. The health care space was able to outperform other counter-cyclical groups as biotechnology displayed strength. The iShares Nasdaq Biotechnology ETF settled higher by 1.3%.
Wednesday saw the major averages settle with modest losses as the S&P 500 shed 0.7%. Equities slipped out of the gate as sellers drove the major averages to their lows 90 minutes into the session. This marked the return of bargain hunters, who helped the S&P return to its opening levels. However, the relative weakness of several influential groups like energy and health care kept the benchmark average from regaining its flat line.
On Thursday, stocks settled with modest gains as late afternoon selling knocked the major averages from their highs following a headline from Nikkei news, indicating Japan plans to impose new foreign exchange margin trading rules. The news caused dollar/yen to slip into the red while also weighing on equities. Most major financials saw gains of at least 1.0% as Morgan Stanley climbed 3.4% to outperform its peers. Meanwhile, the broader financial sector rose 1.1% to extend its May gain to 7.6%.DJ30 -208.96 NASDAQ -35.38 SP500 -23.67 NASDAQ Adv/Vol/Dec 694/1.79 bln/1789 NYSE Adv/Vol/Dec 464/1.13 bln/2596
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