Day Traders Diary



The major U.S. indices eked out a victory on Tuesday, overcoming a further tightening of geopolitical tensions following yet another North Korean ballistic missile launch. The Nasdaq (+0.3%) led the advance, followed closely by the Dow (+0.3%), the S&P 500 (+0.1%), and the small-cap Russell 2000 (+0.1%). Equity indices settled near their best marks of the day.

North Korea rattled equity markets around the globe on Tuesday morning after firing a missile over the Japanese island of Hokkaido--marking the first time since 2009 that Pyongyang has fired over Japan's main islands. In response, President Trump said "all options are on the table" and reports indicated that the U.S. and Japan will call for an international embargo on oil exports to North Korea.

Wall Street opened solidly lower, but quickly began retracing its opening loss, and moved higher still as the reversal in sentiment sent short sellers running for cover. The rally was led by the industrial sector (+0.7%), which benefited from strength in defense names following the North Korean launch. Dow component Boeing (BA 240.49, +3.31) finished higher by 1.4%.

Dow component Untied Technologies (UTX 118.70, +3.37) also bolstered the industrial group, jumping 2.9%, following a Wall Street Journal report that the company is nearing a deal to buy Rockwell Collins (COL 130.74, +2.75) for a price of up to $140 per share. In addition, transports outperformed, pushing the Dow Jones Transportation Average (+0.9%) to its third-consecutive win.

The top-weighted technology sector (+0.4%) also outperformed on Tuesday, helping to mitigate the negative performance of the influential financial space (-0.5%). The financial sector suffered amid broad weakness, but select property and casualty insurers bounced back from yesterday's sell off, which was in response to the devastation caused along the Texas coast by Tropical Storm Harvey.

Like yesterday, WTI crude futures moved lower, dropping 0.3% to $46.22/bbl, amid concerns about near-term demand following the closure of many oil refineries along the Texas coast. Meanwhile, RBOB gasoline futures climbed 1.3% to $1.64/gallon.

As for the remaining sectors, health care (+0.2%) and consumer staples (+0.3%) finished in the green while consumer discretionary (-0.2%), energy (-0.1%), materials (-0.6%), utilities (-0.2%), telecom services (-0.2%), and real estate (-0.1%) settled in the red.

Retailers struggled after Finish Line (FINL 8.50, -1.92) issued a very disappointing second quarter warning and reduced its fiscal 2018 outlook. The shoe-retailer dropped 18.4% and Nike (NKE 52.73, -1.00) moved 1.9% lower in sympathy. In addition, Best Buy (BBY 55.02, -7.45) tumbled 11.9% despite beating both top and bottom line estimates and raising its guidance for the fiscal year.

U.S. Treasuries moved higher across the curve in response to the North Korean missile test, but finished a ways off from their best marks of the day. The benchmark 10-yr yield dropped two basis points to 2.14%, but traded as low as 2.09% in the early morning. Meanwhile, the U.S. Dollar Index (92.28, +0.11) managed to eke out a small victory, coming back from a loss of around 0.6%.

It's also worth mentioning that the CBOE Volatility Index (VIX 11.76, +0.44) held a huge gain of around 27.0% early on Tuesday morning, but trimmed that gain to 3.8% by the closing bell.

The Reviewing Tuesday's economic data, which was limited to the Consumer Confidence report for August and the Case-Shiller Home Price Index for June:

  • The consumer confidence reading for August rose to 122.9 from the prior month's revised reading of 120.0 (from 121.1). The consensus expected the survey to hit 120.3.
    • The key takeaway from the report is that consumer confidence remained high as the current labor market assessment overshadowed a lot of the political drama that has called into question the ability to implement a tax reform plan this year.
  • The June Case-Shiller 20-city Index hit 5.7%, which is in line with the consensus. The prior month's reading was left unrevised at 5.7%.

On Wednesday, investors will receive several economic reports, including the weekly MBA Mortgage Applications Index at 7:00 ET, the ADP Employment Change Report for August ( consensus 180K) at 8:15 ET, and the second estimate of second quarter GDP ( consensus 2.7%) at 8:30 ET.

  • Nasdaq Composite +17.1% YTD
  • Dow Jones Industrial Average +10.6% YTD
  • S&P 500 +9.3% YTD
  • Russell 2000 +2.0% YTD
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