Day Traders Diary



U.S. equities retreated from record highs on Thursday as investors took some profits following a largely uninterrupted two-month rally. The major indices finished near the top of their trading ranges, with the S&P 500 and the Dow losing 0.4% apiece. The tech-heavy Nasdaq (-0.6%) underperformed as technology shares faced particularly heavy selling.

The Senate released its version of a tax reform bill, which called for delaying a cut in the corporate tax rate by one year and differed from the version that the House unveiled last week in several other key areas--including property tax, mortgage interest, and medical expense deductions. The two chambers will have to hammer out those differences in order to put the bill on the president's desk for approval, and doubts surrounding Congress' ability to do just that were cited by some as the main catalyst for Thursday's sell off.

More likely, however, the Senate's unveiling provided a convenient excuse for investors to take some money off the table following yet another record high run for the major U.S. indices. All three major averages finished the prior session at fresh all-time highs and have added between 5.0% and 7.6% since September 8.

Technology shares within the S&P 500 were particularly weak on Thursday, losing 0.9%. Chipmakers paced the tech retreat, sending the PHLX Semiconductor Index lower by 2.0%, with names like Broadcom (AVGO 265.64, -6.76) and Advanced Micro (AMD 11.12, -0.59) losing 2.5% and 5.0%, respectively.

The industrial sector (-1.3%) did even worse, settling at the bottom of the sector standings, while a handful of groups managed to move modestly higher--including consumer discretionary (+0.2%), energy (+0.3%), utilities (+0.1%), and telecom services (+0.3%).

Shares of 21st Century Fox (FOXA 28.70, +0.61) jumped 2.2% after the media giant reported better-than-expected earnings and sales for its fiscal first quarter. Peers like Walt Disney (DIS 102.68, +1.50), CBS (CBS 58.08, +0.83), and Viacom (VIAB 24.78, +0.48) moved higher in sympathy, adding between 1.5% and 2.0%. 

Retailers outperformed as well, evidenced by the 1.6% increase in the SPDR S&P Retail ETF (XRT 39.71, +0.64). Macy's (M 19.50, +1.93) led the retail advance, surging 11.0% after reporting above-consensus earnings for its fiscal third quarter and reaffirming its guidance for 2018.

In other corporate news, CNBC reported that the Department of Justice has not set a requirement for Time Warner (TWX 87.05, -1.45) to sell CNN in order to be acquired by AT&T (T 34.00, +0.56), as was reported on Wednesday. Time Warner shares slipped 1.6%, while AT&T shares climbed 1.7%.

U.S. Treasuries ended on a mixed note, with shorter-dated issues showing relative strength while longer-dated issues exhibited relative weakness. The benchmark 10-yr Treasury note finished flat, however, with its yield settling unchanged at 2.33%. Meanwhile, the U.S. Dollar Index dropped 0.4% to 94.42, and WTI crude futures climbed 0.6% to $57.14/bbl.

Elsewhere, Japan's Nikkei had an unnerving bout of volatility on Thursday before ending little changed (-0.2%), while the Euro Stoxx 50 tumbled 1.0%.

Reviewing Thursday's economic data, which was limited to the weekly Initial Claims Report and September Wholesale Inventories:

  • The latest weekly initial jobless claims count totaled 239,000, while the consensus expected a reading of 231,000. Today's tally was above the unrevised prior week count of 229,000. As for continuing claims, they rose to 1.901 million from the unrevised count of 1.884 million.
    • The key takeaway is that initial claims, which remained below 300,000 for the 140th straight week, are low and indicative of a tight labor market.
  • September Wholesale Inventories increased 0.3% ( consensus +0.3%). The prior month's reading was revised to +0.8% from +0.9%.
    • The key takeaway from the report is that the sales increase outpaced the inventory increase by a sizable margin, which is a step in the right direction for wholesalers trying to regain some pricing power.

On Friday, investors will receive two economic reports--the preliminary reading of the University of Michigan Consumer Sentiment Index for November ( consensus 100.5) and the October Treasury Budget. The two reports will be released at 10:00 ET and 14:00 ET, respectively.

  • Nasdaq Composite +25.4% YTD
  • Dow Jones Industrial Average +18.7% YTD
  • S&P 500 +15.5% YTD
  • Russell 2000 +8.7% YTD

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