Day Traders Diary



Stocks swung sharply on Wednesday afternoon following the release of the Fed's latest policy directive, which increased the fed funds target range by 25 basis points to 1.50%-1.75%. The S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average eventually settled with modest losses between 0.2% and 0.3%, but the small-cap Russell 2000 outperformed, finishing with a gain of 0.6%.

The rate hike wasn't a surprise as investors had long expected that the Fed would increase rates at its March meeting. What investors weren't sure of, however, was whether the Fed would stick to its forecast of three rate hikes for 2018, thinking it might bump up that number to four. To the market's relief, the former proved to be true -- the Fed is calling for just two additional rate hikes this year (three in total) -- but officials did raise their rate-hike projections for 2019; they're now calling for three hikes next year, up from two in December.

Equities were volatile following the decision, with the S&P 500 jumping to a new session high (+0.8%) and then to a new session low (-0.3%) within a span of 45 minutes. Similarly, the Treasury market seesawed a bit, eventually finishing the session on a mixed note; the yield on the benchmark 10-yr note finished three basis points above its Tuesday close at 2.91%, while the Fed-sensitive 2-yr yield dropped three basis points to 2.31%.

Only three of eleven S&P sectors finished Wednesday in positive territory -- industrials (+0.1%), materials (+1.1%), and energy (+2.6%). The energy group was strong throughout the session, benefiting from a rise in the price of crude oil; West Texas Intermediate crude futures jumped 3.0% to $65.45 per barrel, their best level in nearly seven weeks, after the Department of Energy reported that U.S. crude inventories declined by 2.6 million barrels last week.

On the flip side, the consumer staples sector finished at the bottom of the sector standings with a loss of 1.3%. General Mills (GIS 45.51, -4.42) led the group lower, dropping 8.9%, after lowering its profit guidance for fiscal year 2018. The top-weighted technology sector (-0.6%) also underperformed, but Facebook (FB 169.39, +1.24) managed to advance 0.7% following heavy losses on Monday and Tuesday, which were due to the Cambridge Analytica scandal.

Wednesday's economic data included Existing Home Sales for February, the Current Account Balance for the fourth quarter, and the weekly MBA Mortgage Applications Index:

  • Existing home sales increased 3.0% in February to an annualized rate of 5.54 million units ( consensus 5.42 million). The January reading was left unrevised at 5.38 million.
    • The key takeaway from the report remains the same: notable supply constraints continue to act as a drag on overall sales. The limited inventory -- and the high prices on available inventory -- is crimping affordability, particularly for first-time buyers; moreover, all prospective buyers are going to feel added affordability pressures from rising mortgage rates.
  • The current account deficit for the fourth quarter totaled $128.2 billion ( consensus -$125.0 billion). The third quarter deficit was revised to $101.5 billion from $100.6 billion.
  • The weekly MBA Mortgage Applications Index decreased 1.1% to follow last week's uptick of 0.9%.

On Thursday, investors will receive the weekly Initial Jobless Claims Report ( consensus 225K) at 8:30 AM ET, the FHFA Housing Price Index for January ( consensus +0.4%) at 9:00 AM ET, and The Conference Board's Leading Economic Index for February ( consensus +0.5%) at 10:00 AM ET.

  • Nasdaq Composite: +6.4% YTD
  • S&P 500: +1.4% YTD
  • Dow Jones Industrial Average: -0.2% YTD
  • Russell 2000: +2.9% YTD

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