Day Traders Diary



The stock market claimed its first victory of the week in style with the S&P 500 (+0.8%), the Nasdaq (+0.8%), and the Dow (+0.7%) all closing at new record highs. It was also encouraging that the Dow Jones Transportation Average (+1.2%) and the domestically-oriented Russell 2000 (+1.9%), both leading indicators that do well when it's thought that economic activity is picking up, finished well above the broader market.

A better than expected ADP National Employment Report for May (253,000 actual vs 180,000 consensus) was enough to place the major averages a tick above their flat lines at the opening bell. However, the early momentum stalled immediately thereafter as the S&P 500 faced some technical resistance at its previous record close (2,415.8).

Range-bound action prevailed until around 11:00 ET when the Energy Information Administration (EIA) released its weekly crude inventory report. The EIA reading came in better than expected, showing that U.S. crude stocks declined by 6.4 million barrels (-3.0 million barrels consensus) for the week ended May 26.

Crude oil held a modest gain of 0.5% going into the EIA release and then more than doubled it in the aftermath, climbing as high as $49.17/bbl. The energy sector (+0.7%), and the broader market, also moved higher, helping the S&P 500 overcome the technical resistance it faced in early-morning action.

From there, the stock market never looked back as the financial sector (+1.2%) continued to pick up strength into the afternoon. The financial sector's solid performance undoubtedly had a positive impact on investor sentiment considering the group's recent struggles. For instance, just yesterday, the sector slipped 0.8% on cautious commentary from industry leaders.

The influential health care sector (+1.2%) also played an important leadership role as biotech names outperformed. The sector benefited from broad strength, but the biotechnology industry made a notable contribution, evidenced by the 1.8% increase in the iShares Nasdaq Biotechnology ETF (IBB 290.89, +5.14).

Retailers also performed exceptionally well, pushing the SPDR S&P Retail ETF (XRT 41.64, +0.90) higher by 2.2% and helping the consumer discretionary sector (+0.9%) finish ahead of the broader market. The lightly-weighted materials group (+1.1%) also demonstrated relative strength, but most of the remaining sectors settled roughly in line with the broader market.

However, the top-weighted technology sector (+0.3%) lagged throughout Thursday's session amid spiritless performances from some of its most influential components, including Apple (AAPL 153.18, +0.42), Microsoft (MSFT 70.10, +0.26), Facebook (FB 151.53, +0.07), and Alphabet (GOOGL 988.29, +1.20). Still, for the year, the technology sector is higher by an impressive 20.0%.

Crude oil, which helped free the stock market of technical resistance early, faded into the close, settling flat at $48.32/bbl. However, the stock market did just the opposite with a late-afternoon uptick leaving the major averages at their session highs. For the week, the S&P 500 now trades higher by 0.6%.

It's also worth noting that President Trump officially announced his decision to withdraw the U.S. from the Paris Climate Accord, as expected. The announcement did not move the broader market.

U.S. Treasuries settled the day slightly lower with the benchmark 10-yr yield climbing one basis point to 2.21%. Meanwhile, the U.S. Dollar Index (97.14, +0.23) added 0.2%.

In addition to the ADP Employment Change Report for May, investors received several other economic reports on Thursday, including Initial Claims, April Construction Spending, and the May ISM Manufacturing Index:

  • The latest weekly initial jobless claims count totaled 248,000 while the consensus expected a reading of 239,000. Today's tally was above the revised prior week count of 235,000 (from 234,000). As for continuing claims, they declined to 1.915 million from the revised count of 1.924 million (from 1.923 million).
    • The key takeaway from the report is that it reflects a general reluctance still among employers to cut payrolls, which is indicative of a belief that it is tough to find new workers and/or the demand outlook is favorable.
  • The Construction Spending report for April showed a decrease of 1.4% while the consensus expected an increase of 0.5%. The prior month's reading was revised to 1.1% from -0.2%.
    • The key takeaway from the report is that it will curtail some of the second quarter GDP growth estimates since spending in April was roughly in-line with the first quarter average.
  • The ISM Manufacturing Index for May rose to 54.9 from an unrevised reading of 54.8 in April while the consensus expected a downtick to 54.7.
    • The key takeaway from the report is that the manufacturing sector is still humming along in an expansion mode, paced by growth in new orders.

Tomorrow, investors will receive the Employment Situation Report for May ( consensus 185,000) and the April Trade Balance ( consensus -$44.3 billion).

  • Nasdaq Composite +16.0% YTD
  • S&P 500 +8.5% YTD
  • Dow Jones Industrial Average +7.0% YTD
  • Russell 2000 +2.9% YTD

All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.