Day Traders Diary


  Investors cautiously nudged the major averages higher on Monday in another afternoon rally that has become almost expected as of late. The Dow (+0.1%) closed at a fresh record high for the 12th consecutive time, while the S&P 500 (+0.1%) posted a fresh record high of its own. The Nasdaq finished with a gain of 0.3%.

Equity indices opened the morning session mildly lower following a relatively disappointing durable goods, excluding transportation, reading. However, President Trump got things rolling with some comments shortly after the opening bell.

Bulls turned their attention to aerospace & defense names like Boeing (BA 179.43, +1.99) and Lockheed Martin (LMT 269.36, +5.18) after Mr. Trump proposed a $54 billion boost to defense spending, making good on his promise from last Friday to implement one of the "greatest military buildups in American history." Additionally, the president's comments helped send shares of Caterpillar (CAT 97.44, +1.96) higher after the promise to touch on his infrastructure plan during his first address to Congress, which will take place tomorrow evening.

The industrial space (+0.3%) led the stock market back to its flat line, where it hovered until its afternoon advance.

Energy (+0.9%) finished Monday at the top of the leaderboard. The space did receive some help from crude oil, although not as much as early indications may have predicted. WTI crude finished just above its flat line, higher by 0.1% at $54.04/bbl, despite trading as high as $54.60/bbl in the overnight session.

Financials (+0.5%), health care (+0.4%), and real estate (+0.5%) also outperformed with health care receiving a boost from the biotechnology industry. The iShares Nasdaq Biotechnology ETF (IBB 298.27, +8.37) jumped 2.9% higher, closing near its five-month high.

On the flip side, telecom services finished Monday at the bottom of the leaderboard after AT&T (T 41.82, -0.54) announced that it will be lowering the price of its unlimited data plan, pointing to increased competition within the wireless space.

Consumer staples (-0.6%) fared only slightly better, suffering in light of the dissolved Kraft-Heinz (KHC 90.51, -2.54)-Unilever (UL 47.69, +0.58) merger after Warren Buffett said that KHC is not planning a hostile takeover of UL and that there is no backup deal in the works. Given that Mr. Buffett is the chairman of Berkshire Hathaway (BRK.b 170.63, +0.41), which invested in the Kraft-Heinz merger back in 2015, his comments on the situation hold some weight.

Mr. Buffett also revealed that he more than doubled his holdings in Apple (AAPL 136.93, +0.27) between January 1 and the company's earnings report on January 31. AAPL added 0.2% on the news, but it wasn't enough to keep technology (-0.1%) out of the red.

U.S. Treasuries finished the day with large losses as investors revised up their probabilities for a rate hike at the March 14-15 FOMC meeting; the fed funds futures market now shows an implied probability of 35.4% from 26.6% on Friday. The benchmark 10-yr yield closed Monday five basis points higher at 2.37%. In addition, bond traders have started looking at the possibility of another debt ceiling showdown and a possible government shutdown if there is no agreement on how to deal with the debt limit by March 15.

Today's economic data included January Durable Orders and January Pending Home Sales:

January durable goods orders rose 1.8%, which is in line with the consensus. The prior month's reading was revised to -0.8% (from -0.4%). Excluding transportation, durable orders declined 0.2% ( consensus +0.5%) to follow the prior month's revised gain of 0.9% (from 0.5%).

The key takeaway from the report is that the "hard" data indicates business spending declined at the start of the year, which is contradictory of the spending optimism reported in the "soft" survey data.

Pending Home Sales for January declined 2.8% while the consensus expected an increase of 0.9%. Today's reading follows a revised 0.8% uptick in December (from 1.6%).

Tuesday's economic data will include the second estimate of fourth quarter GDP ( consensus 2.1%) and January International Trade in Goods at 8:30 ET, February Chicago PMI ( consensus 53.0%) at 9:45 ET, and February Consumer Confidence ( consensus 111.5) at 10:00 ET.


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