Day Traders Diary
The major stock indices ended Monday mixed as weakness in technology and health care shares limited the impact of gains elsewhere.
Equities opened the day at record highs, but technology shares moved sharply lower soon thereafter. The Dow (+0.2%) still managed to settle at a new all-time high but, like its peers, finished near its lowest mark of the day. The S&P 500 (-0.1%) held a gain until the very end, while the tech-heavy Nasdaq (-1.1%) was weak throughout the session.
At their best marks of the day, the Dow, S&P 500, and Nasdaq held gains of 1.3%, 0.9%, and 0.8%, respectively.
Six of eleven sectors finished the session in positive territory, with all six adding at least 0.8% apiece--financials (+1.6%), consumer discretionary (+1.2%), industrials (+0.8%), materials (+1.0%), consumer staples (+0.9%), and telecom services (+1.6%). The prospect of tax reform largely fueled the broad strength.
The U.S. Senate passed its version of a tax reform bill over the weekend, placing the GOP one step closer to fulfilling its promise of the largest tax overhaul in more than 30 years. Lawmakers will now attempt to reconcile the Senate's version with the version the House passed a few weeks back--a process Republicans are hoping to complete by Christmas.
In addition, a correction to a report that ABC released on Friday also acted as a bullish catalyst. The news agency originally reported that President Trump asked Michael Flynn to contact the Russians during his presidential campaign but later edited that statement, saying the request was made after Mr. Trump had already won the election.
Within the consumer discretionary group, Dow component Walt Disney (DIS 110.22, +4.97) jumped 4.7% following a Wall Street Journal report that the company has restarted talks to acquire assets from 21st Century Fox (FOXA 33.09, +0.90), and retailers sent the SPDR S&P Retail ETF (XRT 44.52, +1.00) higher by 2.3%.
In the industrial space, transports also showed particular strength, evidenced by the Dow Jones Transportation Average (+1.8%), which closed at a new record high.
However, the impact of the aforementioned gains was largely mitigated by the top-weighted technology sector, which fell to profit taking at the tail end of an impressive year. The group dropped 1.9%--marking the second time in less than a week it has lost more than 1.0% in a day--but still remains the year's top-performing sector with a year-to-date gain of 33.5%.
For comparison, the S&P 500 has added 17.9% year to date, and the second-best performer--financials--is up 20.0%.
The heavily-weighted health care sector also did some damage on Monday, losing 1.2%. Within the space, health insurer Aetna (AET 178.70, -2.61) lost 1.4% after announcing it will be acquired by CVS Health (CVS 71.69, -3.43) for $207 per share in cash and stock. CVS shares tumbled 5.0%.
In the bond market, U.S. Treasuries moved lower in another curve-flattening trade that reduced the 2yr-10yr spread by two basis points. The yield on the benchmark 10-yr Treasury note climbed two basis points to 2.38%, while the 2-yr yield jumped four basis points to 1.81%.
Elsewhere, equities in Europe finished Monday broadly higher, with the Euro Stoxx 50 adding 1.5%, while indices in the Asia-Pacific region settled mixed. Brexit negotiations have reportedly stalled due to differences over the Irish border, which divides the Republic of Ireland (EU member) and Northern Ireland (part of the UK).
Reviewing Monday's economic data, which was limited to October Factory Orders:
On Tuesday, investors will receive just two economic reports--the October Trade Balance (Briefing.com consensus -$47.4 billion) and November ISM Services (Briefing.com consensus 59.3). The two pieces of data will be released at 8:30 ET and 10:00 ET, respectively.