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Leigh Baldwin & Co.

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Day Traders Diary

4/10/18

 
 

Stocks were up big from start to finish on Tuesday following conciliatory remarks from Chinese President Xi Jinping, which helped ease fears of a global trade war. The major averages endured some intraday volatility to finish a step below their best marks of the day -- the S&P 500 added 1.7%, the Dow climbed 1.8%, and the Nasdaq advanced 2.1% -- which was an encouraging sign for investors, who were still a little shell shocked following Monday's sharp reversal.

Mr. Xi helped alleviate fears that the U.S. and China are barreling towards a tit-for-tat trade war in an overnight speech at the Boao Forum, saying that he plans to "significantly" cut tariffs on imported automobiles, reduce duties on other imported goods, and improve the intellectual property rights of foreign firms. President Trump, who has promised to hit China with tariffs in an effort to reduce Washington's trade deficit with Beijing, praised Mr. Xi for his comments, saying the two leaders will "make great progress together."

Moving to the Middle East, uncertainty as to how President Trump will respond to a chemical attack in Syria prompted traders to push oil prices higher on Tuesday, which, in turn, fueled a strong outing for energy shares; the S&P 500's energy sector rallied 3.3%, while West Texas Intermediate crude futures jumped 3.2% to $65.49 per barrel -- their best level in two weeks. President Trump's response to the chemical attack -- which killed more than 40 people on Saturday -- is believed to be imminent.

In Washington, Mark Zuckerberg -- Facebook's (FB 165.04, +7.11) founder, chairman, and CEO -- began a two-day testimony on Capitol Hill with an appearance before a joint hearing of the Senate Judiciary and Commerce Committees on Tuesday, answering questions regarding the Cambridge Analytica data scandal and Russia's alleged use of Facebook to influence the 2016 U.S. presidential election. The market appeared to like what Mr. Zuckerberg had to say, as Facebook's share price more than double its daily gain after he began speaking; FB shares finished higher by 4.5%.

Nine of eleven S&P 500 sectors finished Tuesday in positive territory, with the lightly-weighted utilities (-0.7%) and real estate (-0.7%) sectors being the lone laggards. The energy group (+3.3%) was the top performer, while the top-weighted technology sector (+2.5%) and the telecom services space (+2.3%) finished in second and third, respectively. Within the telecom space, Sprint (S 6.02, +0.88) and T-Mobile US (TMUS 63.13, +3.39) spiked 17.1% and 5.7%, respectively, following a Wall Street Journal report that the two companies have restarted merger talks.

In the bond market, U.S. Treasuries ended Tuesday on a mostly lower note, with the long bond showing relative strength for the second consecutive day. The yield on the benchmark 10-yr Treasury note finished one basis point higher at 2.80%, while the yield on the 30-yr bond finished flat at 3.02%. Yields move inversely to prices.

Investors received just two pieces of economic data on Tuesday -- the Producer Price Index for March and Wholesale Inventories for February:

  • Producer prices rose 0.3% in March (Briefing.com consensus +0.2%) and core producer prices increased 0.3% (Briefing.com consensus +0.2%). Year-over-year, producer prices are up 3.0% (vs +2.8% in February) and core producer prices have risen 2.7% (vs +2.5% in February).
    • The key takeaway from the report is that producer prices are trending higher, which will feed concerns about a pass through to consumers and keep the Federal Reserve wedded to its belief that inflation rates are poised to pick up, leaving it with a tightening bias.
  • February Wholesale Inventories increased 1.0% (Briefing.com consensus +1.1%). The January reading was revised to +0.9% from +0.8%.
    • The market doesn't typically pay much attention to this release since the full business inventories report is usually released a short time later.

On Wednesday, investors will receive the weekly MBA Mortgage Applications Index at 7:00 AM ET, the Consumer Price Index (Briefing.com consensus +0.1%) for March at 8:30 AM ET, and both the minutes from the March FOMC meeting and the March Treasury Budget at 2:00 PM ET.

  • Nasdaq Composite: +2.8% YTD
  • Russell 2000: +0.5% YTD
  • S&P 500: -0.6% YTD
  • Dow Jones Industrial Average: -1.3% YTD

Headlines provided by Briefing.com

 

 

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