Day Traders Diary
The major U.S. indices closed out the abbreviated week on a mixed note as investors looked ahead to the weekend, which could see Hurricane Irma's arrival in Florida and another North Korean missile test in celebration of the country's 69th anniversary. The Dow ticked up 0.1% while the S&P 500 and the Nasdaq settled with losses of 0.2% and 0.6%, respectively. For the week, the S&P 500 lost 0.6%.
Property and casualty insurers bounced back on Friday after spending recent weeks on the decline in response to hurricane-related concerns. Travelers (TRV 119.76, +4.58) was the strongest component within the Dow and among the strongest names within the heavily-weighted financial sector, which settled at the top of the sector standings. TRV shares climbed 4.0%.
In total, four sectors finished Friday's session in the green--financials (+0.8%), industrials (+0.3%), health care (+0.4%), and utilities (+0.4%)--while seven groups ended the day in the red--consumer discretionary (-0.4%), energy (-1.1%), materials (unch), technology (-0.9%), consumer staples (-0.7%), telecom services (-0.1%), and real estate (unch).
Chipmakers weighed heavily on the technology sector, evidenced by the PHLX Semiconductor Index, which dropped 1.3%. Qualcomm (QCOM 49.64, -0.74) lost 1.5% after a federal judged denied the company's bid to dismiss a patent-royalty lawsuit, allowing Apple (AAPL 158.63, -2.63) manufacturers to continue withholding royalty payments as the case continues.
Elsewhere, retailers struggled after Target (TGT 57.27, -1.15) announced that it is cutting prices on thousands of items and Kroger (KR 21.06, -1.71) said that it will stop providing long-term earnings guidance due to the "dynamic operating environment." The companies' shares moved lower by 2.0% and 7.5%, respectively.
Equifax (EFX 123.23, -19.49) plunged 13.7% after announcing that around 143 million of its U.S. customers had their personal information stolen in a data hack. Reports indicate that the company first discovered the compromise in late July and three senior executives sold about $1.7 million in stock soon thereafter.
In Washington, the House passed President Trump's Wednesday agreement with Democratic lawmakers, which packages Hurricane Harvey relief funding with a three-month extension of both government funding and the debt ceiling. The bill, which passed the Senate on Thursday, now just needs President Trump's signature.
U.S. Treasuries settled Friday mostly flat with the benchmark 10-yr yield closing at its unchanged mark (2.06%). Meanwhile, the 2-yr yield moved two basis points lower, finishing at 1.25%.
Reviewing Friday's economic data, which included July Wholesale Inventories and July Consumer Credit:
Investors will not receive any economic data on Monday.
Week In Review: Still Within Striking Distance
The major U.S. indices all moved lower this week as geopolitical tensions with North Korea, declining confidence in the feasibility of tax reform, and Hurricane Irma--which is expected to hit Florida this weekend--weighed on investor sentiment. The Nasdaq led the retreat, dropping 1.2%, while the Dow and the S&P 500 finished with respective losses of 0.9% and 0.6%.
Even though the equity market settled lower for the week, it remains within striking distance of its all-time high; the S&P 500 finished Friday's session just 0.8% below its record-high close of 2,480.91. Treasuries rallied this week, sending yields to new lows for the year. The benchmark 10-yr yield dropped 11 basis points to 2.06%, hitting its lowest level since early November.
Similarly, other safe-haven assets--like gold and the Japanese yen--moved higher, jumping 1.6% and 2.3%, respectively. The yellow metal settled at a 13-month high ($1,351.10/ozt) while the dollar/yen pair finished at a ten-month low (107.78). In addition, the CBOE Volatility Index (VIX) spiked 20.2% to 12.18. The financial sector (-2.8%) was pressured by the decline in Treasury yields, but most of the remaining groups finished with losses of no more than 1.1%.
Relative strength in heavyweight names like Home Depot (HD), Exxon Mobil (XOM), and Pfizer (PFE) prevented the stock market from a significant decline, but there were some soft spots in small-cap and high-beta pockets of the market. The small-cap Russell 2000--which is seen as a leading indicator given that small-cap companies largely rely on domestic consumers--underperformed, dropping 1.0%. After pacing the stock market's post-election rally, the small-cap index now holds a year-to-date gain of just 3.1%, far below the S&P 500's year-to-date advance of 9.9%.
High-beta chipmakers also struggled, sending the PHLX Semiconductor Index lower by 2.3%. Large-cap names like Qualcomm (QCOM) and NVIDIA (NVDA) showed particular weakness, settling with losses of 4.6% and 4.0%, respectively. Still, for the year, the PHLX Semiconductor Index is higher by 20.6%.
Following this week's events, the fed funds futures market places the chances of a December rate hike at 31.9%, down from last week's 43.7%.