Day Traders Diary



The S&P 500 (-0.4%) slipped for the third session in a row on Tuesday, with 10 of its 11 sectors finishing in the red.

For a while, it appeared that a bounce-back performance from the top-weighted technology sector, which dropped 1.9% on Monday, might be enough to overpower losses from most other groups. However, the sector weakened as the day wore on, finishing with a modest gain of just 0.2%.

At their best marks of the day, the tech sector held a gain of 1.4%, and the tech-heavy Nasdaq Composite--which ended lower by 0.2%--held a gain of 0.9%.

Meanwhile, the Dow Jones Industrial Average and the small-cap Russell 2000 finished lower by 0.5% and 1.0%, respectively.

As for the other ten sectors, losses ranged from 0.2% to 1.8%. The lightly-weighted telecom services group (-1.8%) finished at the bottom of the sector standings, trimming gains from a largely uninterrupted three-week rally; the group advanced 13.2% from November 14 to December 4.

The utilities sector also showed relative weakness, losing 1.2%, with Edison (EIX 70.00, -10.26) being the group's worst-performing component. The energy provider dropped 12.8% after announcing that more than 260,000 customers in Southern California had lost power due to a fast-moving wildfire in the Ventura County area.

Retailers weighed on the consumer discretionary sector (-0.8%), evidenced by the 1.0% decrease in the SPDR S&P Retail ETF (XRT 44.07, -0.45), while transports led the industrial sector lower by 0.9%; the Dow Jones Transportation Average lost 1.4%, reducing its six-session gain to 6.6%.

Also of note, the heavily-weighted financial sector lost 0.6% amid yet another curve-flattening trade in the bond market.

U.S. Treasuries finished Tuesday's session mixed, cutting the 2yr-10yr spread by five basis points. The yield on the benchmark 10-yr Treasury note slipped three basis points to 2.35%, while the 2-yr yield climbed two basis points to 1.83%. Yields move inversely to prices.

Elsewhere, equities slipped in Asia and Europe, with Hong Kong's Hang Seng (-1.0%) and France's CAC (-0.3%) showing relative weakness in their respective regions.

Reviewing Tuesday's economic data, which included the ISM Services Index for November and the Trade Balance for October:

  • The ISM Services Index for November declined to 57.4 ( consensus 59.3) from an unrevised reading of 60.1 in October.
    • The key takeaway from the report is that business activity in the non-manufacturing sector is still expanding, but at a somewhat slower rate that is still consistent with 3.0%+ real GDP growth.
  • The October trade balance showed a deficit of $48.7 billion ( consensus -$47.4 billion). The September deficit was revised to $44.9 billion from $43.5 billion.
    • The key takeaway from the report is that trade will be accounted for as a negative input in fourth quarter GDP models considering that the real trade deficit of $65.3 billion is 5.3% higher than the third quarter average real trade deficit of $62.0 billion.

On Wednesday, investors will receive the weekly MBA Mortgage Applications Index at 7:00 ET, the ADP Employment Change Report for November ( consensus 190K) at 8:15 ET, and the revised readings for third quarter Productivity ( consensus +3.3%) and Unit Labor Costs ( consensus +0.2%) at 8:30 ET.

  • Nasdaq Composite +25.6% YTD
  • Dow Jones Industrial Average +22.4% YTD
  • S&P 500 +17.5% YTD
  • Russell 2000 +11.8% YTD

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