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Dec 16, 2016

Wall Street Closing Report by CNBC on December 16, 2016: Stocks Slightly Lower; Financials Lag

cnbc.com
 
Evelyn Cheng
 
U.S. stocks came off session highs Friday as some concerns of geopolitical tension surfaced.
Reuters reported in late morning trade that a Chinese Navy warship has seized an underwater drone deployed by an American oceanographic vessel in international waters in the South China Sea, triggering a formal diplomatic protest from the United States and a demand for its return, a U.S. defense official told the newswire.

"A little world tension. The markets sold off exactly when that news story came out," said Peter Coleman, head trader at Convergex.
The three major indexes gave up slight gains to trade slightly lower in midday trade. Technology was the greatest decliner in the S&P.
U.S. Treasury yields edged lower, gold prices climbed, and the yen strengthened against the dollar.
"We've drifted down on (that China news). I'm not surprised. It's such a quiet day," said JJ Kinahan, chief strategist at TD Ameritrade.

S&P 500 intraday 
US 10-year Treasury yield intradaySource: FactSet
"The Treasury market is at or near record shorts, and this led to a meaningful bounce in the market as we head into a week with very little on the calendar," Ian Lyngen of BMO Capital Markets said, pointing out the 10-year yield fell from about 2.62 to 2.56 percent.
Real estate and utilities rose more than 1 percent to lead S&P 500 advancers, while UnitedHealth contributed the most to gains in the Dow Jones industrial average.
"You have (options) expiration today and that's obviously going to make things a little messy," said Jeremy Klein, chief market strategist at FBN Securities. He's also watching the dollar for any signs of further strengthening.

"That's becoming the real issue because you've got a very high multiple out there and a lot of expectations for tax cuts and stimulus, but if the dollar was a problem a year ago, it's got to be a problem" going forward, he said.
The U.S. dollar index hit 103.56 Thursday, its highest level since Dec. 24, 2002. The greenback was near 103.12 in morning trade Friday, with the euro around $1.042 and the yen near 118.19 yen versus the dollar.
A strong dollar and low oil prices have weighed on U.S. corporate earnings in the last year.
U.S. crude oil futures were nearly 2 percent higher around $51.90 a barrel. The weekly U.S. oil rig count rose 12 from last week to 510, according to Baker Hughes.
Treasury yields were off recent highs, with the 10-year Treasury yield around 2.56 percent and the 2-year Treasury yield near 1.23 percent.
Coleman said he's "watching the 10-year Treasury yield. It's obviously running at a moderate level but if and when we get to 3 percent, what kind of impact does that have on the market?" he said.
The dollar and yields jumped after the Federal Reserve on Wednesday surprised with its forecast for three rate hikes in 2017.
Richmond Fed President Jeffrey Lacker said the Fed will need more than three rate hikes in 2017. Separately, St. Louis Fed President James Bullard said in an interview with The Wall Street Journal that after the election, the economy has more upside risk, while it will take a while for the new political landscape to alter the outlook.
Housing starts fell a more-than-expected 18.7 percent in November to a seasonally adjusted annual rate of 1.09 million units. Building permits declined 4.7 percent.
In midday trade, the Dow Jones industrial average traded 23 points higher, or 0.12 percent, to 19,877, with 3M and Boeing contributing the most to gains and Goldman Sachs having the greatest negative impact on the index.
The S&P 500 traded 0.11 points lower, or 0.01 percent, at 2,261, with utilities leading seven sectors higher and technology the greatest decliner.
The Nasdaq composite fell 7 points, or 0.14 percent, to 5,449.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded lower near 12.4.
About two stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of 652 million and a composite volume of 1.8 billion in midday trade.
U.S. crude oil futures for January delivery climbed $1 to $51.90 a barrel on the New York Mercantile Exchange.
Gold futures for February delivery rose $10.20 to $1,139.80 an ounce as of 12:10 p.m., ET.
—CNBC's Patti Domm contributed to this report.