Day Traders Diary



Stocks went on another roller coaster ride on Tuesday, but, unlike Monday, this ride left the major indices solidly higher.


The Dow Jones Industrial Average jumped 2.3%, the Nasdaq Composite climbed 2.1%, and the S&P 500 advanced 1.7%, ending near the top of their trading ranges, which were quite large; at its worst mark of the day, the S&P 500 was down 2.1% and, at its best, held a gain of 2.0%. The market was very volatile, weathering several sharp reversals.


Tuesday's advance put a sizable dent in Monday's decline, but the major averages are still solidly lower for the week, showing losses between 1.7% and 2.4%.


Nine of eleven sectors finished in positive territory, with cyclical groups setting the pace--a possible sign that investors are shifting their focus back to the fundamentals, including an upbeat economic growth outlook that is expected to translate into impressive earnings growth.


The top-weighted technology space (+2.8%) showed particular strength. Within the group, chipmakers were strong, evidenced by the 3.7% increase in the Philadelphia Semiconductor Index, after Micron (MU 43.88, +4.48) raised its profit and sales guidance for the current quarter; MU shares jumped 11.4%. Heavyweights like Apple (AAPL 163.03, +6.54), Microsoft (MSFT 91.33, +3.33), Facebook (FB 185.31, +4.05), and Alphabet (GOOGL 1084.43, +22.04) also had solid showings, adding between 2.1% and 4.2%.


General Motors (GM 41.86, +2.32) led the consumer discretionary sector (+2.5%) higher, climbing 5.9%, after reporting better-than-expected earnings for the fourth quarter and reaffirming its guidance for fiscal year 2018. The group's largest component by market cap--Amazon (AMZN 1442.84, +52.84)--also outperformed, adding 3.8%.


The materials sector (+2.8%) also had a solid day, with DowDuPont (DWDP 71.89, +4.05) rallying 6.0%.


On the downside, the rate-sensitive utilities (-1.5%) and real estate (-0.2%) sectors declined on Tuesday as Treasury yields bounced back from their overnight lows. Yields still settled mostly lower though, with the benchmark 10-yr yield slipping two basis points to 2.77%. The 10-yr yield was down as much as 14 basis points overnight.


Meanwhile, the CBOE Volatility Index (VIX 30.14, -7.18), often referred to as the "investor fear gauge," dropped 19.2% after surging more than 100% on Monday.


Elsewhere, equity indices in the Asia-Pacific region finished Tuesday lower, with Japan's Nikkei, Hong Kong's Hang Seng, and China's Shanghai Composite losing between 3.4% and 5.1%, as did the major European bourses; Germany's DAX, the UK's FTSE, and France's CAC lost between 2.2% and 2.8%.


In Washington, Politico reported that the Senate is nearing an agreement on a two-year spending deal that would increase spending levels for both domestic and defense programs. Congressional leaders are expected to stick said budget deal into a funding bill that the House plans to vote on tonight and get lawmakers to pass the combined measure before funding runs out at midnight on Thursday.


It's worth noting that these bills don't address immigration. Lawmakers expect to begin working on immigration after getting past the upcoming spending deadline.


Reviewing Tuesday's economic data, which included the December Trade Balance and the December Job Openings and Labor Turnover Survey:


The December trade balance showed a deficit of $53.1 billion ( consensus -$52.3 billion). The November deficit was revised to $50.4 billion from $50.5 billion.

The December trade deficit was the largest since October 2008 and it revealed increased trade deficits with the European Union and China. The key takeaway from the report, then, is that it is apt to feed concerns about protectionist trade policies being adopted in an attempt to narrow those trade deficits.

The December Job Openings and Labor Turnover Survey showed that job openings decreased to 5.811 million from a revised 5.978 million (from 5.879 million) in November.


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