Day Traders Diary



U.S. equities slipped on Thursday as investors continued to monitor tax reform developments in Washington.

Losses were modest for the most part, but small caps showed notable weakness, pushing the Russell 2000 lower by 1.2%. The S&P 500 declined by 0.4%, while the Nasdaq Composite and the Dow Jones Industrial Average shed 0.3% apiece. The Dow's loss ended its streak of record closes at four in a row.

Equities began the day slightly higher, but were tripped up by rumors that House Speaker Paul Ryan (R-WI) is considering resigning following the 2018 mid-term elections. Mr. Ryan later said that he does not plan on retiring anytime soon, but equities failed to bounce back to their earlier levels. 

Selling persisted following news that Senator Marco Rubio (R-FL) will vote 'No' on tax reform unless the final bill further expands the child tax credit for lower-income households. The GOP can only afford to lose two votes in the Senate, and it's already assumed that Senator Bob Corker (R-TN) will vote against the piece of legislation.

The GOP aims to release the full details of the bill on Friday, and Congress is expected to vote on the measure sometime next week.

Ten of the eleven sectors finished Thursday in the red, with the health care (-1.1%), materials (-1.1%), and telecom services (-0.9%) groups being the weakest performers. Within the health care space, biotech names were especially weak, sending the iShares Nasdaq Biotechnology ETF (IBB 105.17, -1.55) lower by 1.5%.

Meanwhile, steelmaker Nucor (NUE 59.54, -2.31) paced the material sector's retreat, losing 3.7%, after lowering its profit guidance for the fourth quarter.

On the upside, the consumer discretionary sector (+0.3%) advanced on Thursday. 21st Century Fox (FOXA 34.88, +2.13) led the charge, adding 6.5%, after Walt Disney (DIS 110.57, +2.96) agreed to purchase select assets from the company, including its film division and much of its TV operations, for $52.4 billion in stock. DIS shares climbed 2.8%.

In the bond market, U.S. Treasuries had a mixed outing, despite a stronger-than-expected Retail Sales Report for November (see data section below). The yield on the benchmark 10-yr Treasury note finished flat at 2.35%, while the 2-yr yield climbed one basis point to 1.80%. The 10-yr yield has lost three basis points so far this week.

Elsewhere, European equities finished Thursday broadly lower, with the Euro Stoxx 50 losing 0.5%, while Japan's Nikkei, Hong Kong's Hang Seng, and China's Shanghai Composite shed 0.3% apiece. The U.S. dollar added 0.4% against the euro (1.1785) but lost 0.3% and 0.1%, respectively, against the yen (112.25) and the pound (1.3430).

The European Central Bank decided to leave its key policy rate unchanged, as expected, and reiterated that it will reduce its monthly asset purchases to EUR30 billion (from EUR60 billion) starting in January and continuing through September 2018, or beyond, if necessary.

In addition, the Bank of England voted unanimously to leave its key rate at 0.50% and its asset purchase program at GBP435 billion, as expected.

Reviewing Thursday's economic data, which included November Retail Sales, weekly Initial Claims, November Export/Import Prices, and October Business Inventories:

  • November retail sales increased 0.8% ( consensus +0.3%). The prior month's increase was revised to 0.5% from 0.2%. Excluding autos, retail sales increased 1.0% in November while the consensus expected an increase of 0.6%. The prior month's increase was revised to 4% from 0.1%.
    • The key takeaway from the report is that there was healthy spending activity across discretionary categories, which is consistent with a consumer feeling good about their income prospects.
  • The latest weekly initial jobless claims count totaled 225,000, while the consensus expected a reading of 239,000. Today's tally was below the unrevised prior week count of 236,000. As for continuing claims, they declined to 1.886 million from the revised count of 1.913 million (from 1.908 million).
    • The latest week marks the 145th straight week initial claims have been below 300,000.
  • Import prices excluding oil were flat in November (0.0%) after increasing a revised 0.1% in October (from +0.2%). Export prices excluding agriculture increased 0.6% in November after decreasing a revised 0.1% in October (from -0.3%).
    • The monthly gain left import prices up 3.1% year-over-year, versus up 0.2% for the 12 months ending November 2016, and export prices up 3.1% year-over-year, versus down 0.2% for the 12 months ending November 2016.
  • Business Inventories decreased 0.1% in October, as expected. The September reading was left unrevised at 0.0%.
    • The key takeaway from the report is that sales growth is outpacing inventory growth, which is a step toward regaining some pricing power.

On Friday, investors will receive the Empire State Manufacturing Survey for December ( consensus 18.0) at 8:30 ET and both Industrial Production ( consensus +0.3%) and Capacity Utilization ( consensus 77.2%) at 9:15 ET.

  • Nasdaq Composite +27.4% YTD
  • Dow Jones Industrial Average +24.0% YTD
  • S&P 500 +18.5% YTD
  • Russell 2000 +11.1% YTD

All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.