The S&P 500 lost 0.3% on Thursday in another tight-ranged session, which included the underperformance of cyclical sectors and the outperformance of defensive-oriented sectors. Investors also weighed better-than-expected GDP data, the latest batch of earnings reports, and some geopolitical drama.

The Dow Jones Industrial Average lost 0.3%, the Nasdaq Composite lost 0.3%, and the Russell 2000 lost 0.4%. The major averages traded with modest losses for most of the session, but all of them finished higher for the month.

The S&P 500 materials (-1.3%), energy (-1.0%), and consumer discretionary (-0.6%) sectors underperformed the broader market. Conversely, the utilities (+0.4%), consumer staples (+0.3%), and real estate (+0.3%) sectors outperformed. 

The U.S. economy slowed less than expected in the fourth quarter of 2018 despite the stock market volatility. Data out of China, meanwhile, showed its manufacturing sector remained in contraction in February.

The advance estimate of Q4 GDP showed an annualized increase of 2.6% (Briefing.com consensus 2.3%). That number, however, was below the growth registered in the second and third quarters of last year, and with China still showing signs of weakness, investors remained cautious.

Separately, media attention was placed on President Trump abruptly ending a two-day summit with North Korean leader Kim Jong-un. President Trump hoped to curb Pyongyang's nuclear-weapons program, but communication broke down when North Korea wanted the U.S. to lift all sanctions in exchange for closing some, but not all, of its nuclear sites. North Korea later refuted this account. 

A mixed, but mostly underwhelming batch of earnings reports kept many buyers sidelined. 

Booking Holdings (BKNG 1697.04, -208.90, -11.0%), HP Inc. (HPQ 19.73, -4.12, -17.3%), Box (BOX 20.24, -4.64, -18.7%), and Crocs (CROX 25.68, -2.84, -10.0%) dropped considerably following their reports. Anheuser-Busch InBev (BUD 78.16, +3.44, +4.6%) and Monster Beverage (MNST 63.83, +5.09, +8.7%), however, pleased investors with their results.

U.S. Treasuries finished lower following the release of the better-than-expected advance Q4 GDP reading. The 2-yr yield increased one basis point to 2.50%, and the 10-yr yield increased two basis points to 2.71%. The U.S. Dollar Index increased 0.1% to 96.22. WTI crude rose 0.5% to $57.22/bbl.

Reviewing Thursday's economic data, which included the advance fourth quarter GDP estimate, the weekly Initial and Continuing Claims report, and the Chicago PMI for February:

• The Advance Q4 GDP estimate showed economic output increased at an annualized rate of 2.6% (Briefing.com consensus 2.3%). The GDP Deflator increased 1.8% (Briefing.com consensus 1.7%). With the fourth quarter numbers, it is estimated that real GDP increased 2.9% in 2018 versus 2.2% in 2017. From the fourth quarter of 2017 to the fourth quarter of 2018, though, real GDP increased 3.1%.
  • The key takeaway from the report is that it supported the notion that the U.S. economy held up relatively well in the fourth quarter despite the stock market volatility. In turn, it will help rebut any notions that the economy is on the cusp of a recession.
• Initial claims for the week ending February 23 increased by 8,000 to a still-low 225,000 (Briefing.com consensus 221,000). Continuing claims for the week ending February 16 increased by 79,000 to 1.805 million.
  • The key takeaway from this report is that the low level of initial claims, which have held below 300,000 for 208 consecutive weeks, continues to support the view that the labor market remains tight and that employers are reluctant to let go of employees.
• The MNI Chicago Business Barometer, also known as the Chicago PMI, increased to 64.7 in February (Briefing.com consensus 57.5) from 56.7 in January. The dividing line between expansion and contraction is 50.0.
  • The key takeaway from the report is that the New Orders Index rebounded swiftly from a two-year low to its highest level since November.

Looking ahead, investors will receive several more economic reports on Friday: Personal Income for December and January, Personal Spending for January, the ISM Manufacturing Index for February, and the final reading for the University of Michigan Index of Consumer Sentiment for February.

• Russell 2000 +16.8% YTD
• Nasdaq Composite +13.5% YTD
• Dow Jones Industrial Average +11.1% YTD
• S&P 500 +11.1% YTD

Headlines provided by Briefing.com