Day Traders Diary
The major averages ended Tuesday on a lower note, erasing yesterday's gains. Today's trade featured a hotter-than-expected reading of April CPI (+0.4%; Briefing.com consensus +0.3%), hawkish commentary from FOMC members, a breach of the 50-day simple moving average (2056.90) in the S&P 500 (-0.9%), and the underperformance of consumer discretionary (-1.2%), health care (-1.1%), and technology (-1.1%). The Nasdaq Composite (-1.3%) ended behind both the Dow Jones Industrial Average (-1.0%) and the benchmark index (-0.9%).
Today's session began on a lower note as investors looked to the possible rate hike implications stemming from a hotter-than-expected reading of inflation in April. Meanwhile, Home Depot (HD 132.00, -3.34) came under pressure despite reporting above-consensus quarterly results. Additionally, the market maintained a negative bias after disclosures that George Soros placed bearish bets on the broader market by doubling his put position on the SPDR S&P 500 ETF (SPY 204.85, -1.92) and boosting his holdings in gold.
The S&P 500 (-0.9%) tested and briefly defended support near its 50-day simple moving average (2056.90) in the late morning, but was unable to do so again when that level was re-tested in the afternoon. As a result, the major averages extended their losses through the final hour. Nine sectors ended in the red with consumer staples (-1.9%), utilities (-1.7%), consumer discretionary (-1.2%), and health care (-1.1%) rounding out the leaderboard.
In the consumer staples sector (-1.9%), Kraft Heinz (KHC 82.16, -3.71) displayed relative weakness, losing 4.3%. Meanwhile, Hormel Foods (HRL 38.80, -1.44) ended lower by 3.6% ahead of tomorrow morning's earnings report. The broader sector trimmed its May gain to 0.3%, trailing only technology (-1.1%; month-to-date +0.4%) over that time.
Drug manufacturers displayed relative weakness in the health care space (-1.1%) as the sub-group moved lower in sympathy with AbbVie (ABBV 60.25, -2.20). The company fell 3.5% after receiving a negative ruling regarding its patent on a dosing regimen involving its rheumatoid arthritis medication. Conversely, Valeant Pharmaceuticals (VRX 29.08, +2.03) gained 7.5% after Citron's Andrew Left confirmed that he has opened a long position in the stock.
In the consumer discretionary space (-1.2%), Home Depot declined 2.5% despite topping analysts' estimates for the quarter. Fellow home improvement name Lowe's (LOW 76.07, -0.93) slipped 1.2% ahead of tomorrow morning's quarterly report.
Interest rate-sensitive real estate investment trusts (REITs) underperformed in the financial sector (-0.7%). The sub-group was pressured by the hotter-than-expected CPI reading and hawkish commentary from FOMC members. San Francisco Fed President Williams, Atlanta Fed President Lockhart, and Dallas Fed President Kaplan each said that an interest rate hike may be warranted sooner than the market currently anticipates one. For the June Fed meeting, the likelihood of a rate increase, as measured by the fed funds futures market, jumped to 15.0% from yesterday's 3.8% estimate.
The U.S. Dollar Index (94.52, -0.01) ended slightly lower as the euro and the yen ended flat against the greenback. The dollar/yen pair finished higher by 0.1% at 109.09 while the euro ended at 1.1316 against the dollar. Separately, pound sterling gained 0.4% against the dollar (1.4462).
The Treasury complex ended on a mixed note with the yield on the 10-yr note ending higher by one basis point at 1.76%.
Today's participation was above the recent averages as more than 1.02 billion shares changed hands on the NYSE floor.
Today's economic data included April Core CPI, April Housing Starts, April Building Permits, April Industrial Production, and April Capacity Utilization:
Tomorrow's economic data will be limited to the 7:00 ET release of the weekly MBA Mortgage Index; however, the the Federal Open Market Committee will release the minutes from the April 27 meeting at 14:00 ET.
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