The tech-heavy Nasdaq closed at a record Thursday, as the broader stock market finished lower, dragged down by a steep slide in the financial sector and major retailers.
Mixed data on jobs also raised concerns a day before the closely watched December employment report due Friday.
The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +1.71% closed up 10.93 points, or 0.2%, at 5,487.94, following a day of slight gains and losses. Shares of Amazon.com Inc . /zigman2/quotes/210331248/composite AMZN +5.69% supported the index with a 3.1% gain. The last time the Nasdaq notched a record close was Dec. 27.
Meanwhile, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.52% fell 42.87 points, or 0.2%, to close at 19,899.29, paring losses after being down by as much as 131 points. Among the biggest decliners were Travelers Cos. /zigman2/quotes/206313935/composite TRV -0.18% , shedding 1.6%, and Exxon Mobil Corp. /zigman2/quotes/204455864/composite XOM -2.47% , down 1.5%. J.P. Morgan Chase & Co . /zigman2/quotes/205971034/composite JPM -1.09% finished down 0.9% and Goldman Sachs Group Inc. , /zigman2/quotes/209237603/composite GS -1.23% declined 0.7%, paring sharp losses from earlier in the session.
The S&P 500 index /zigman2/quotes/210599714/realtime SPX +1.05% declined 1.75 points, or 0.1%, to finish at 2,269.00. The financial sector was the index’s biggest drag, falling 1%, while retailers, Kohl’s Corp. /zigman2/quotes/210414114/composite KSS -3.16% , and Macy’s Inc. /zigman2/quotes/201854387/composite M -0.63% , were taking it on the chin after disappointing holiday sales and announcing stores closures.
Shares of Macy’s plummeted to close down 14% after the department-store chain late Wednesday announced plans to close 68 stores and lay off 10,000 employees in 2017. Fellow retailer Kohl’s, saw its worst trading day ever, finishing down 19%, after it cut its fiscal 2016 earnings outlook late Wednesday, following volatile holiday sales.
Markets have enjoyed an upswing lately, with investors betting that President-elect Donald Trump will accelerate economic growth by emphasizing corporate tax cuts and deregulation. While most view the market’s uptrend as intact, the pace of the rally—which has taken major indexes to repeated records and pushed the Dow within striking distance of 20,000—has some concerned that equity valuations are getting ahead of fundamentals, notably earnings growth.
But the uptrend that got the stock market to this point—a strong dollar trade, rallying financials, and a jump in bond yields—is showing signs of faltering, and that has many investors anticipating a downturn, said Bill Stone, chief investment strategist at PNC Asset Management Group, in an interview.
“What’s interesting is that yesterday we saw some shift in terms of higher-than-expected inflation out of the eurozone and that took starch out of the dollar’s rally,” Stone said.
On Thursday, eurozone producer prices data showed a 0.1% rise for November, following Wednesday’s data showing that eurozone inflation jumped to 1.1% in December. Since the election, both the S&P 500 and the dollar both rallied in lockstep about 6% before hitting recent resistance.
An uptick in inflation will make it more difficult for the European Central Bank to push for stimulus measures, which means the strong dollar trend could weaken, he said. Add to that the anticipation that stocks generally sell off during the first quarter following an election, and the worry that the Trump rally is heading for a reversal only grows, Stone said.
Others are worry that the postelection rally has simply overextended itself.
“We must be careful with the strength in equity markets; the upside has been undoubtedly strong, and for me a little too strong,” said James Hughes, chief market analyst, at GKFX, in a note.