By Sue Chang and Anora Mahmudova, MarketWatch
Energy shares rally, but jump in yields hits defensive stocks
The Dow Jones Industrial Average bucked the broader market's weakness on Thursday to close at a record high, even as large-cap technology stocks weighed down the Nasdaq Composite index for a second straight session.
The Dow rose 68.35 points, or 0.4%, to close at 19,191.93 after touching an intra-day high of 19,214.30.
The tech-laden Nasdaq shed 72.57 points, or 1.4%, to finish at 5,251.11, weighed down by big declines in semiconductor and biotechnology shares. The iShares Nasdaq Biotechnology ETF (IBB) dropped 1.7%.
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.
Notable losers on Thursday include Micron Technology Inc.(MU), Qualcomm Inc.(QCOM), Yahoo Inc.(YHOO), and Facebook Inc.(FB).
The S&P 500 index fell 7.73 points, or 0.4%, to end at 2,191.08 as 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 a 16-month high of 2.44%, according to FactSet.
"From a performance and chart perspective, the same themes that have dominated the investment landscape since the election seem to be at play again today...big cap techs are again underperforming while financials and energy are garnering buyside interest," said Frank Cappelleri, executive director at Instinet LLC.
Investors pocketing short-term profits as the market consolidates following a strong run-up since early November contributed to the selling pressure, according to strategists. An Italian referendum on proposed constitutional reform on Sunday, widely viewed as a vote of confidence in Prime Minister Matteo Renzi, is also prompting jitters, said Quincy Krosby, a market strategist, at Prudential Financial.
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 finalPMI 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, released Wednesday, showed 216,000 jobs were added last month.
The much-anticipated November 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.
Oil futures continued to climb, with West Texas Intermediate oil futures up more than 3% following a deal reached by the OPEC producers to cut production a day earlier. The gains 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)
The Energy Select Sector SPDR ETF (XLE), the most popular way for investors to play the energy space, came off of earlier highs to rise 0.3%.
"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)
Stocks to Watch: General Motors Co.(GM) shares surged 5.5% 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 20% 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 11% 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 0.6%. 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 16:39 ET (21:39 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.