Day Traders Diary



Equities were up and down on Wednesday, eventually settling below Tuesday's closing levels, as influential FAANG names like Amazon (AMZN 1431.42, -65.63) and Netflix (NFLX 285.77, -14.92) dropped sharply for the second day in a row. The tech-heavy Nasdaq declined 0.9%, while the S&P 500 shed 0.3%. The Dow finished flat.

The market has struggled to find sturdy ground since a volatile drop in early February. This week's action has fully embodied that struggle; equities shot higher on Monday, pushing the S&P 500 up 2.7%, only to give back the bulk of those gains in a broad sell off on Tuesday. With the S&P 500's 50-day simple moving average (2733) out of reach, investors have been keeping an eye on the index's 200-day simple moving average (2588), which has provided support on a couple of occasions in recent weeks. The S&P 500 finished Wednesday at 2605.

Wednesday's sector standings were pretty evenly divided between advancers and decliners. Defensive groups like health care (+0.5%), consumer staples (+1.4%), and telecom services (+1.6%) were the top performers, while growth-oriented groups like consumer discretionary (-1.2%), energy (-2.0%), materials (-1.3%), and technology (-0.9%) finished at the back of the pack. The financial sector, which is the second-most influential group (behind technology), finished with a gain of 0.2%.

Amazon was a big reason that the consumer discretionary sector underperformed, as AMZN shares dropped 4.4% to a six-week low. The selling followed an Axios report that President Trump would like to change Amazon's tax treatment, alleging that it has gotten a free ride from taxpayers. The White House responded to the report, saying there aren't any policy changes regarding Amazon at the moment, but the administration is always looking at different options.

Meanwhile, energy shares declined in tandem with the price of crude oil after the Department of Energy reported that U.S. crude stockpiles increased by 1.6 million barrels last week. West Texas Intermediate crude futures dropped 0.9% to $64.61 per barrel, further distancing themselves from Friday's eight-week high.

In the technology sector, Apple (AAPL 166.48, 1.86) declined 1.1%, extending its monthly loss to 6.5%, and chipmakers pushed the PHLX Semiconductor Index lower by 2.1%. Dow component Intel (INTC 49.60, -1.59) was among the weakest semiconductor names, dropping 3.1%, while NVIDIA (NVDA 221.35, -4.17) lost 1.9%. Facebook (FB 153.03, +0.81) outperformed, however, advancing 0.5% after announcing an initiative to "put people more in control of their privacy" -- a direct response to the Cambridge Analytica data scandal.

Elsewhere, the Treasury market had a mixed outing on Wednesday. The benchmark 10-yr note extended Tuesday's gains at the start of the session, but began ticking lower following a poor $29 billion 7-yr note auction, which drew a high yield of 2.72% on a bid-to-cover of 2.34. The 10-yr note still finished in the green though, with its yield declining one basis point to 2.78%. Meanwhile, the yield on the 2-yr note advanced two basis points to 2.29%, reducing the 2s10s spread to 49 basis points -- its lowest level since 2007.

Meanwhile, the U.S. Dollar Index advanced 0.9% to 89.76, with the greenback adding 0.8% against the euro (1.2308) and 1.5% against the yen (106.88).

Reviewing Wednesday's economic data, which included the third estimate for fourth quarter GDP, Pending Home Sales for February, the Advance International Trade in Goods report for February, and the weekly MBA Mortgage Applications Index:

  • The third estimate of fourth quarter GDP pointed to an expansion of 2.9%, while the consensus expected a reading of 2.6%. The second estimate came in at 2.5%.
    • The key takeaway from the report is that it does not change the general picture of economic growth at the end of 2017.
  • Pending Home Sales increased 3.1% in February ( consensus +2.5%). Today's reading follows a revised 5.0% decrease in January (from -4.7%).
  • The Advance report for International Trade in Goods for February showed a deficit of $75.4 billion ( consensus -$74.2 billion), up from a revised deficit of $75.3 billion in January (from -$74.4 billion).
  • The weekly MBA Mortgage Applications Index increased 4.8% to follow last week's decline of 1.1%.

On Thursday morning, investors will receive February Personal Income ( consensus +0.4%), Personal Spending ( consensus +0.2%), PCE Prices ( consensus +0.2%), and core PCE Prices ( consensus +0.2%), the weekly Initial Claims report ( consensus 230K), the Chicago PMI ( consensus 62.0), and the final reading of the University of Michigan Consumer Sentiment Index for March ( consensus 102.0).

  • Nasdaq Composite: +0.7% YTD
  • S&P 500: -2.6% YTD
  • Dow Jones Industrial Average: -3.5% YTD
  • Russell 2000: -1.5% YTd

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