By Sue Chang and Anora Mahmudova, MarketWatch
Energy shares rally, but jump in yields hits defensive stocks
The Nasdaq Composite index sank on Thursday as large-cap technology stocks slumped, but the Dow Jones Industrial Average was on track for a record close following upbeat manufacturing data and rising oil prices.
The tech-laden Nasdaq shed 72 points, or 1.4%, to 5,251, weighed down by big declines in semiconductor and biotechnology shares. The iShares Nasdaq Biotechnology ETF (IBB) dropped 1.3%.
The significant international exposure among tech companies makes them more vulnerable given the recent rise in the U.S. dollar, said Karyn Cavanaugh, senior market strategist at Voya Financial.
The S&P 500 index fell 9 points, or 0.4%, to 2,189 as big gains in the energy and financials sectors were offset by losses in technology, utilities and consumer staples. So-called defensive sectors are pressured as interest rates rise, measured by the yield on the 10-year Treasury which climbed to 2.46%, a 17-month high.
Investors pocketing short-term profits as the market consolidates following a strong run-up since early November contributed to the selling pressure in the market, according to strategists.
The Dow Jones Industrial Average , meanwhile, rose 45 points, or 0.3%, to 19,172, above its record high close of 19,152.14 set on Nov. 25.
Oil futures continued to climb, with West Texas Intermediate oil futures up more than following a deal reached by the OPEC producers to cut production a day earlier. The jump in oil comes on the heels of a more than 9% surge on Wednesday. (http://www.marketwatch.com/story/oil-prices-rebound-but-many-doubtful-opec-can-get-a-deal-done-2016-11-30)
Read: These oil stocks are soaring after OPEC's cut--and more gains are on the way (http://www.marketwatch.com/story/these-us-oil-stocks-are-soaring-after-opecs-cut-and-more-gains-are-on-the-way-2016-11-30)
Data releases on Thursday were mixed but pointed to continued growth in the labor market and manufacturing.
The ISM manufacturing index rose to 53.2% in November from 51.9% in October. A reading above 50 indicates expansion. Meanwhile, Markit's November final PMI index was at 54.1 compared with 53.4 in October.
The number of Americans applying for unemployment benefits (http://www.marketwatch.com/story/jobless-claims-rise-17000-to-268000-2016-12-01)over the week ended Nov. 26 jumped 17,000 to 268,000. The layoff level is still close to multidecade lows, however. ADP data showed 216,000 jobs were added last month.
The much-anticipated jobs report is due Friday.
"It seems like people are just waiting for Friday's jobs report --the final data release before the Fed's meeting in two weeks," said Kim Caughey Forrest, senior analyst and portfolio manager at Fort Pitt Capital Group.
"Investors haven't finished rotating out of defensive and into more cyclical sectors yet. And December being a 'tax-loss harvesting' month, we might see more fund managers selling their losers and buying the winner," Forrest said.
The Energy Select Sector SPDR ETF (XLE), the most popular way for investors to play the energy space, rose 1.4% on top of 5.1% gain on Wednesday, its biggest one-day move since November 2011.
"Given the [drastic] change we've now seen in oil prices, this has the potential to deliver a meaningful impact to manufacturing costs, inflation and may also prove unsettling for consumers as North America moves into the depths of winter," said Jamieson Blake, retail sales manager at ADS Securities London, in a note.
Read:This is what investors say is the biggest risk for 2017 (http://www.marketwatch.com/story/this-is-what-investors-say-is-the-biggest-risk-for-2017-2016-11-30)
Movers and shakers: General Motors Co.(GM) shares surged 5.3% to the highest level since November 2015 after the auto maker said November U.S. vehicle sales jumped 8% from a year ago, with all four brands showing growth.
Shares of Guess Inc.(GES) slumped 10% after the fashion retailer late Wednesday cuts its earnings outlook for the year (http://www.marketwatch.com/story/guess-cuts-outlook-posts-disappointing-results-2016-11-30-17485106).
Express Inc. (EXPR) dropped 21% after the apparel and accessories retailer beat fiscal third-quarter expectations but provided a downbeat outlook for the current quarter (http://www.marketwatch.com/story/expresss-stock-plunges-after-profit-and-sales-outlook-were-well-below-expectations-2016-12-01).
Dollar General Corp.(DG) fell 5% following weaker-than-expected third-quarter results.
FuelCell Energy Inc. (FCEL) sank 12% after the struggling fuel cell power plant company said it cut 96 jobs, or 17% of its workforce, in an effort to cut to costs and production amid falling sales.
Other markets: Asian markets closed firmly higher (http://www.marketwatch.com/story/asia-stocks-higher-with-nikkei-headed-for-best-close-of-2016-2016-12-01), lifted by optimism over the OPEC output deal. Japan's Nikkei 225 index logged its best finish of 2016. European stocks were mainly lower (http://www.marketwatch.com/story/european-stocks-in-the-red-as-consumer-goods-shares-fall-but-oil-shares-rise-2016-12-01).
The dollar declined against most other major currencies, with the ICE Dollar Index down 0.3%. Gold extended losses for a third session.
--Barbara Kollmeyer in Madrid and Carla Mozee and Sara Sjolin in London contributed to this article.
(END) Dow Jones Newswires
December 01, 2016 14:22 ET (19:22 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.