The Dow industrials on Thursday gathered momentum deeper in to record territory, but the broader market traded lower following a less-than-stellar round of economic data and a slump in the energy sector.
The Dow Jones Industrial Average DJIA, +0.06% traded less than 0.1% higher at 22,032, supported by gains in Pfizer Inc. PFE, +1.96% but pressured by a decline in Apple Inc. AAPL, -1.05% after a run-up in the iPhone maker’s stock on the heels of its well-received quarterly results.
Meanwhile, the S&P 500 index SPX, -0.22% backed up by 6 points, or 0.3%, at 2,472, weighed by 1.3% downdraft in the energy sector, topped by a 10% decline in Concho Resources Inc. CXO, -10.01% and a 7.6% fall in shares of Noble Energy Inc. NOB, +0.00%
The energy-focused Energy Select Sector SPDR ETF XLE, -1.76% a popular way to make bets on the sector, was off 1.4% and on track for its worst one-day slide since June 21 when it fell 1.6%. Selling in energy stocks coincided with a modest retrenchment in crude-oil futures, with West Texas Intermediate futures traded on the New York Mercantile Exchange CLU7, -1.07% pivoting 0.6% lower at $49.29 a barrel.
Meanwhile, the technology-laden Nasdaq Composite Index COMP, -0.29% gave up 14 points, or 0.2%, at 6,348.
“Energy is primarily the only thing that is keeping the S&P from being in positive territory,” said Michael Antonelli, equity sales trader at Robert W. Baird & Co.
The trader said investors are also taking a step back from recent gains.
“Investors are leaning a little bit more cautiously simply for the very, very near term because of bullish sentiment being higher than normal,” he said. Antonelli also said the tendency of August to be a weak moth for returns and is giving investors reason to pause.
On the economic front, a closely watched service-sector report from the Institute for Supply Management indicated that nonmanufacturing activity, also known as services, fell to 53.9% in July from 57.4% in June.
Economists polled by MarketWatch expected a reading of 56.9%. Any reading above 50% indicates improving conditions. A reading of 50 indicates expansion.
Services’ slowing pace comes after an early reading of employment didn’t stoke much of a market reaction, showing weekly jobless claims holding at a 44-year low, underlining the health of the labor market. Initial jobless claims from July 23 to July 29 declined by 5,000 to 240,000, while the average of new claims over the past month fell to 241,750.
Randy Frederick, managing director of trading and derivatives at Schwab Center for Financial Research, said Thursday’s pullback for stocks wasn’t atypical of a market that has hit repeat records in the past year, fueled in part by hope for better corporate results and a pro-business atmosphere fostered by President Donald Trump’s administration.
“Every time we see a major index hit a milestone…you see a little sideways action or a pullback. It’s not at all uncommon,” Frederick said.
Worries that equities are rising too quickly have stoked some fears that a severe, near-term downdraft is imminent but the Schwab analyst said the case for bullishness is still prevailing.
Upbeat earnings, relatively low rates and a downturn in the dollar, which supports revenues from multinational corporations, should offer tailwinds.
On Wednesday, the Dow rose by 52.32 points, or 0.2%, to an all-time closing high of 22,016.24, while the S&P 500 and Nasdaq Composite finished roughly unchanged.
Satellite-TV provider Dish Network Corp. DISH, -4.75% posted a sharp drop in quarterly earnings and weaker-than-expected revenue, while cleaning products giant Clorox Co.’s CLX, +2.08% profit topped expectations, as its sales matched views. Shares of Dish were off 4.7%, while Clorox’s stock climbed 3.5%.
Kellogg Co. shares K, +4.67% rose 3.8% after the Frosted Flakes producer delivered better-than-expected second-quarter results. Net income was $282 million, or 80 cents per share, up from $280 million, or 79 cents per share, for the same period last year. Adjusted earnings-per-share was 97 cents, beating the 92-cent FactSet consensus.
Allergan PLC AGN, +0.05% shares added 0.2% as the drugmaker lifted its full-year guidance for revenue in 2017 to $15.85 billion, compared with prior guidance of $15.8 billion.
Aetna Inc.‘s AET, +2.28% shares climbed 1.4% after the health-care company’s second-quarter earnings beat analyst forecasts. Profit for the quarter came in at $1.2 billion, or $3.60 a share, up from $791 million, or $2.23 a share, a year ago.
Economic news: A high-profile release on the job market is due Friday: the U.S. government’s monthly data on nonfarm payrolls.
Check out: MarketWatch’s Economic Calendar
Other markets: The British pound GBPUSD, -0.6881% lost ground as traders reacted to the Bank of England’s “Super Thursday” releases. The U.K. central bank’s Monetary Policy Committee voted to keep its key interest rate at 0.25% in a 6-2 vote. The ICE U.S. Dollar Index DXY, -0.04% was up modestly.