Day Traders Diary



Equities made a strong move higher on Wednesday, with the S&P 500 and the Nasdaq climbing 1.0% apiece, and the Dow advancing 0.8%.

The day began on a mildly higher note as investors continued to digest President Trump's Tuesday decision to withdraw the U.S. from the Iran nuclear deal. However, buying picked up notably around midday as the S&P 500 started to pull away from its 50-day moving average -- which, up until that point, had been an area of resistance.

The energy sector led the charge on Wednesday, closing atop the sector standings -- by a wide margin -- with a gain of 2.0%. A rebound in the crude oil futures market, which returned to a three-and-a-half year high after tumbling on Tuesday in a "sell the news" trade, fueled the energy rally; WTI crude futures settled higher by 2.9% at $71.10 per barrel. President Trump's decision to restore the "highest level of economic sanctions" against Iran, OPEC's third-largest oil exporter, will likely decrease crude supply on the global market -- which, in turn, should force prices higher.

In total, nine of eleven S&P sectors closed in the green. In addition to energy, the financials (+1.5%), technology (+1.4%), materials (+1.4%), and industrials (+1.1%) sectors added more than 1.0% apiece. On the downside, the lightly-weighted utilities and telecom services sectors finished at the back of the pack with losses of 0.8% and 1.1%, respectively.

The consumer staples sector closed a tick higher, but a ways behind the broader market. Walmart (WMT 83.06, -2.68) weighed on the group, losing 3.1%, after the company agreed to buy a 77% stake in Indian e-commerce giant Flipkart for $16 billion -- which qualifies as Walmart's largest acquisition deal ever.

On the earnings front, Walt Disney (DIS 99.97, -1.82) beat both earnings and revenue estimates for its fiscal second quarter, but continued concerns about the ESPN business and the fate of the company's deal to acquire the entertainment assets of 21st Century Fox (FOXA 37.70, -0.29) overpowered the good earnings news; DIS shares finished lower by 1.8%.

U.S. Treasuries ended Wednesday on a broadly lower note, pushing yields higher across the curve. The yield on the benchmark 10-yr Treasury note returned to the psychologically important 3.00% mark, finishing four basis points above its Tuesday close, while the 2-yr yield ticked up one basis point to 2.53% -- a fresh cycle high.

Reviewing Wednesday's economic data, which included the April Producer Price Index, March Wholesale Inventories, and the weekly MBA Mortgage Applications Index:

  • The Producer Price Index for final demand increased 0.1% ( consensus +0.2%), while the final demand index, less food and energy, rose 0.2%, as expected.
    • The key takeaway from the report is that there was a moderation in the producer price inflation trend in April, yet it wasn't significant enough to alter the Federal Reserve's perspective pertaining to the presumed path for inflation and monetary policy.
  • Wholesale inventories increased 0.3% in March ( consensus +0.5%) on top of a downwardly revised 0.9% increase (from +1.0%) in February.
    • The market is known for showing a limited reaction to the release, since the full business inventories report is released a few days later.
  • The weekly MBA Mortgage Applications Index declined by 0.4%.

On Thursday, investors will receive the April Consumer Price Index ( consensus +0.3%), weekly Initial Claims ( consensus 220K), and the April Treasury Budget.

  • Nasdaq Composite: +6.3% YTD
  • Russell 2000: +3.9% YTD
  • S&P 500: +0.9% YTD
  • Dow Jones Industrial Average: -0.7% YTD

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