Day Traders Diary



There was little change in the stock market on Wednesday, which was basically the case throughout the session.  The major indices were confined to tight trading ranges, vacillating within close proximity to Tuesday's closing levels.

The lack of conviction was consistent with Tuesday's trading, which was one of the lightest volume days of the year at the NYSE.  Volume was a little heavier today at 548 million shares, yet it was still far below "normal" levels as vacation schedules continued to be fuller than trading desks.

That is nothing unusual this time of year, yet it will be noticed nonetheless by veteran market watchers that the Santa Claus rally period, which includes the last five trading days of the year and the first two trading days of the new year, has been slow to get going.

That period is typically a good period for the stock market.  According to the Stock Trader's Almanac, it has produced an average gain of 1.5% for the S&P 500 since 1950.  Through the first three days of this year's Santa Claus rally period, the S&P 500 has slipped 0.07%.

There is still time for Santa to show, but it is fair to say that it will be a condensed showing if he does.

Today's sector returns were certainly condensed, as there wasn't a single sector that increased, or decreased, more than 0.4%.

The best-performing sectors were real estate (+0.4%) and utilities (+0.4%), which found some support from a big drop in long-term rates.  In fact, the Treasury market is where most of today's trading excitement was found.

The yield on the 10-yr note fell six basis points to 2.41% while the yield on the 30-yr bond dropped six basis points to 2.75%.  There were gains, though, across the yield curve, but a curve flattening trade prevailed as the 2-yr note yield slipped only two basis points to 1.88%.

There wasn't a telling news item for the strength in the Treasury market. The Consumer Confidence report for December was a bit weaker than expected, yet that wasn't enough to account for the sizable increase in Treasury prices; moreover, the $34 billion 5-year note auction was weak, which wouldn't be a rally factor.

The suspected tailwind was a drop in European bond yields, a likely trigger for an interest-rate differential trade that has tamped down long-term rates all year despite improving economic activity and three rate hikes from the Federal Reserve.

It is possible, too, that safe-haven trading was in play going into year end, which will feature another three-day weekend.

Back to the stock market, the energy sector (-0.3%) was the biggest loser today, falling victim to some profit taking that was facilitated by a 0.6% drop in oil prices ($59.64, -$0.33), which hit their highest level since mid-2015 on Tuesday.

The consumer discretionary sector dipped 0.2%, weighed down by weakness in many of the retail stocks.  The latter also fell victim to profit taking after staging a big rally in recent weeks.  To wit, Macy's (M 25.64, -1.21) declined 4.5% after gaining as much as 56% from its November 7 low.

Reviewing this morning's economic data, which included the Consumer Confidence report for December and the Pending Home Sales Index for November:

  • The Conference Board's Consumer Confidence Index for December dropped to 122.1 ( consensus 128.0) from a downwardly revised 128.6 (from 129.5) in November, which marked a 17-year high.
    • The key takeaway from the report is that consumers had a less optimistic outlook for business and job prospects in coming months, which is a bit surprising given the advertised benefits of tax reform. Overall, though, consumer confidence remains strong.
  • The Pending Home Sales Index increased 0.2% in November ( consensus -0.7%) following an unrevised 3.5% increase in October

Wednesday's will include the weekly initial claims report and the advance reports for international trade in goods and wholesale inventories for November.

  • Nasdaq Composite: +28.9% YTD
  • Dow Jones Industrial Average: +25.3% YTD
  • S&P 500: +19.8% YTD
  • S&P Midcap 400 Index: +14.8% YTD
  • Russell 2000: +13.8% 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.