Day Traders Diary



Equities are rallying once again today, putting the S&P 500 on track for its fifth-consecutive win ahead of tomorrow's Employment Situation Report for August, which the consensus expects will show the addition of 183,000 nonfarm payrolls. The Nasdaq (+0.9%) and the Russell 2000 (+1.0%) are leading today's advance while the S&P 500 (+0.5%) and the Dow (+0.2%) struggle to keep pace.

Investors have benefited today from the notion that the Fed won't be in a hurry to hike interest rates again this year following yet another tepid inflationary reading; the core PCE Price Index, which was released this morning, added just 0.1% in July, as expected. According to the CME FedWatch Tool, the implied probability of a December rate hike now sits at just 31.5%, down from 38.7% last week.

Nearly all sectors are trading in the green this afternoon with the influential health care group (+1.3%) leading the charge after closing above its 50-day simple moving average (919.36) for the first time in three weeks on Wednesday. Biotech names show particular strength, sending the iShares Nasdaq Biotechnology ETF (IBB 331.38, +7.06) higher by 2.2%.

The top-weighted technology sector (+0.7%) is also trading ahead of the broader market amid broad strength, further padding its margin of victory for the month. The sector currently holds a month-to-date gain of 3.2%. For comparison, the health care group is in second place on the August leaderboard with a gain of 2.7% and the benchmark S&P 500 trades flat.

On the flip side, the financials (-0.1%), consumer staples (unch), utilities (+0.1%), and telecom services (-0.3%) groups are underperforming. Within the financial space, Wells Fargo (WFC 50.98, -0.37) shows relative weakness, losing 0.7%, following reports that around 3.5 million customer accounts were potentially unauthorized in last year's selling scandal, over a million more than initially announced.

In the bond market, U.S. Treasuries are trading mostly flat with the 2-yr Treasury note showing relative strength; the 2-yr yield is down one basis point at 1.32% while the benchmark 10-yr yield is unchanged at 2.13%. Meanwhile, the U.S. Dollar Index (92.86, +0.02) is trading flat after an unsuccessful attempt to extend yesterday's bounce-back performance. 

Crude oil is trading solidly higher this afternoon, up 2.6% at $47.16/bbl. The commodity has declined for four sessions in a row amid demand concerns related to Tropical Storm Harvey, which has forced the closure many oil refineries along the Texas coast. Reports indicate that Motiva Enterprises' Port Arthur refinery, the biggest in Texas, may be shut down for up to two weeks.

Also of note, Treasury Secretary Steven Mnuchin said on Thursday that the White House has a "very detailed" tax plan ready that will be released to the public by the end of September. 

Reviewing Thursday's economic data, which included July Personal Income, Personal Spending, core PCE Prices, Initial Claims, August Chicago PMI, and July Pending Home Sales:

  • Personal income ticked up 0.4% in July ( consensus +0.3%) after an unrevised reading of 0.0% for June. Personal spending rose 0.3% ( consensus +0.4%), while the prior month's reading was revised to 0.2% from 0.1%. The core PCE Price Index, which excludes food and energy, increased 0.1% ( consensus +0.1%).
    • The key takeaway from the report was that inflation pressures remained subdued, which suggests to market participants that expectations for another rate hike this year can also remain subdued.
  • The latest weekly initial jobless claims count totaled 236,000, as expected. Today's tally was above the revised prior week count of 235,000 (from 234,000). As for continuing claims, they declined to 1.942 million from an unrevised count of 1.954 million.
    • This report marks the 130th straight week that initial claims have been below 300,000, which is reflective of an environment in which employers are reluctant to let go of their workers.
  • Chicago PMI for August hit 58.9, unchanged from July and in line with the consensus.
    • All of the barometer components, with the exception of employment, were above their year-ago levels.
  • Pending Home Sales for July declined 0.8% ( consensus +0.5%). Today's reading follows a revised 1.3% increase in June (from +1.5%).
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