Day Traders Diary
The new year rally continued on Tuesday as stocks hit new records for the sixth consecutive session.
The Dow Jones Industrial Average set the pace, jumping 0.4% to 25385.80, while the S&P 500 and the Nasdaq Composite ticked up 0.1% to 2751.29 and 7163.58, respectively. All three major stock indices posted new record closes, but a late wave of selling left them a step below their best marks of the day. The small-cap Russell 2000 lost 0.1%.
Two of the S&P 500's heaviest sectors--health care and financials--led the charge on Tuesday, bouncing back from a disappointing showing on Monday. The health care sector jumped 1.1% amid broad strength with Dow component Johnson & Johnson (JNJ 144.14, +2.25) climbing 1.6% to a new record high and Boston Scientific (BSX 27.96, +2.15) adding 8.3% after raising its sales guidance for the fourth quarter. Biotech shares also outperformed, sending the iShares Nasdaq Biotechnology ETF (IBB 110.41, +2.04) higher by 1.9%.
Meanwhile, the financial sector rallied 0.7% amid a steepening of the yield curve, which translates to an increase in the spread between what lenders charge on loans and what they pay on deposits. The yield on the benchmark 10-yr Treasury note jumped to 2.55% after settling Monday at 2.48% while the 2-yr yield finished flat at 1.96%.
The rise in longer-dated Treasury yields followed the Bank of Japan's decision to reduce daily purchases of 10-25 year government bonds by 5.0%. Reports that the European Central Bank may terminate its purchase program later this year also helped push yields higher. Asian equities advanced on Tuesday with Japan's Nikkei (+0.6%) closing at a 26-year high while the Euro Stoxx 50 climbed 0.2%, securing its fifth consecutive victory.
Back on Wall Street, the industrial sector finished just a step below health care and financials at the top of the sector standings with a gain of 0.6%. Boeing (BA 318.43, +8.28) jumped 2.7% to a new record high, helping give the Dow an edge over the S&P 500 and the Nasdaq; Boeing is the priciest, and therefore the most influential, component in the price-weighted Dow.
The consumer discretionary sector (+0.1%) also finished in the green, but the seven remaining groups settled in the red. The top-weighted technology space lost 0.3% with semiconductor giant Intel (INTC 43.62, -1.12) losing 2.5%. INTC shares extended early losses after Microsoft (MSFT 88.22, -0.06) said fixes for Intel chip vulnerabilities--which were reported last week--could significantly slow certain servers and personal computers.
Retailers struggled in general, trimming gains from a two-month run, but Target (TGT 69.14, +1.96) had a positive outing after raising its earnings guidance for the fourth quarter. TGT shares added 2.9% while the SPDR S&P 500 Retail ETF (XRT 45.81, -0.49) declined 1.1%.
Outside the equity market, West Texas Intermediate crude futures advanced 1.9% to $62.92 per barrel, closing at a three-year high. The advance came in front of tomorrow morning's weekly crude inventory report from the Energy Information Administration, which has shown a draw in U.S. inventories for seven weeks in a row. The energy sector, which typically moves in tandem with energy prices, lost 0.3%, trimming its 2018 gain to 4.2%.
Elsewhere, representatives from North Korea and South Korea met for the first time in over two years. The two sides agreed to hold joint military talks and North Korea will send a delegation to the Winter Olympics in Pyeongchang, a promising sign for the international community, which has been at odds with North Korea over its nuclear program.
Reviewing Tuesday's economic data, which was limited to the Job Openings and Labor Turnover Survey for November and the NFIB Small Business Optimism Index for December:
On Wednesday, investors will receive the weekly MBA Mortgage Applications Index at 7:00 ET, Import/Export Prices for December at 8:30 ET, and Wholesale Inventories for November (Briefing.com consensus +0.7%) at 10:00 ET.