Day Traders Diary



Equities moved higher once again on Tuesday, but conviction was weak ahead of the latest FOMC policy statement, which will be released on Wednesday afternoon. The S&P 500 (+0.1%), the Nasdaq (+0.1%), and the Dow (+0.2%) closed at new record highs, but the small-cap Russell 2000 (-0.1%) lagged a bit, settling just below its unchanged mark.

Wireless names were in focus on Tuesday following reports of renewed merger talks between Sprint (S 8.20, +0.52) and T-Mobile US (TMUS 65.42, +3.62). The two companies spiked 6.8% and 5.9%, respectively, and helped the S&P 500's telecom services sector (+2.3%) finish at the top of the day's sector standings--by a comfortable margin.

Financials also outperformed, sending the influential financial sector (+0.8%) to its seventh win in eight sessions, thanks in part to a slight steepening of the yield curve--which bodes well for lenders. The yield on the 2-yr Treasury note finished flat at 1.39% while the benchmark 10-yr yield climbed one basis point to 2.24%.

Conversely, health care stocks sold off on Tuesday with providers like UnitedHealth (UNH 194.65, -3.54) and Aetna (AET 156.04, -4.96) getting hit the hardest; the two companies dropped 1.8% and 3.1%, respectively. The health care sector (-0.8%) finished near the bottom of the sector standings, surpassed only by the real estate group (-1.0%).

On the earnings front, AutoZone (AZO 535.19, -28.21) plunged 5.0% after its better-than-expected bottom-line results failed to justify its recent four-week rally; AZO shares advanced over 10.0% from August 18 to yesterday's close. The S&P 500's consumer discretionary sector (-0.1%), which houses automotive retailers, finished lower for the fourth session in a row.

Also of note, firearm stocks spiked in late-afternoon action following a Daily Mail report the President Trump is looking to ease industry export restrictions. Names like Sturm Ruger (RGR 54.35, +6.55), American Outdoor Brands (AOBC 15.70, +1.44), and Vista Outdoor (VSTO 23.00, +0.70) settled higher by 13.7%, 10.1%, and 3.1%, respectively.

In politics, President Trump made his U.N. debut on Tuesday, taking a hard stance against North Korea and the Iran nuclear deal. Also, reports indicate that Senate Majority Leader Mitch McConnell (R-KY) is seriously considering a Senate vote on a new health-care reform bill.

Reviewing Tuesday's batch of economic data, which included August Housing Starts, August Import/Export Prices, and the Current Account Balance for the second quarter:

  • Housing starts decreased to a seasonally adjusted annualized rate of 1.180 million units in August ( consensus 1.170 million), down from a revised 1.190 million units in July (from 1.155 million). Building permits increased to a seasonally adjusted 1.300 million in August ( consensus 1.212 million) from a revised 1.230 million in July (from 1.223 million).
    • The key takeaway from the report is that the pace of single-family starts isn't quick enough to alleviate the supply pressures in the housing market that are crimping affordability for prospective homeowners. That isn't expected to improve next month either when the force of the impact from Hurricanes Harvey and Irma weighs on housing starts activity.
  • Import prices excluding oil rose 0.3% in August after declining 0.1% in July. Export prices excluding agriculture increased 0.7% in August after rising 0.3% in July.
    • The key takeaway from the Import-Export Price Index report for August is that it will keep the possibility of a December rate hike on the table.
  • The current account deficit for the second quarter totaled $123.1 billion ( consensus -$115.1 billion). The first quarter deficit was revised to $113.5 billion from $116.6 billion.

On Wednesday, investors will receive just two economic reports--the weekly MBA Mortgage Applications Index and the August Existing Home Sales Report ( consensus 5.42 million)--at 7:00 ET and 10:00 ET, respectively. In addition, the FOMC will release its latest policy directive at 14:00 ET.

  • Nasdaq Composite +20.0% YTD
  • Dow Jones Industrial Average +13.2% YTD
  • S&P 500 +12.0% YTD
  • Russell 2000 +6.1% YTD
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