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Leigh Baldwin & Co.

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Day Traders Diary

5/22/18

 

Stocks held slim gains through most of Tuesday's session, but a late bout of selling left the major averages in negative territory. The Dow led the retreat, losing 0.7%, while the S&P 500 and the Nasdaq ended with losses of 0.3% and 0.2%, respectively. The small-cap Russell 2000 dropped 0.8%, ending its streak of record closes at four.

There was a bullish vibe on Wall Street ahead of Tuesday's opening bell after China's Ministry of Finance announced that it will be cutting import tariffs on U.S. automobiles (to 15% from 25%) and on some U.S. auto parts (to 6% from 8-25%), effective July 1. However, the news, which amplified a weekend promise from Beijing that it will buy more goods from the U.S., was later tainted by the realization that the White House has yet to reach a deal with Beijing to save Chinese telecom company ZTE -- which has been a bargaining chip in trade discussions. 

President Trump said as much on Tuesday afternoon when he dismissed reports that the U.S. and China had agreed to a broad outline of a ZTE deal. Mr. Trump added that a potential deal could include a change in management at ZTE and a fine of up to $1.3 billion. In the same press conference, Mr. Trump touched on his upcoming summit with North Korean leader Kim Jong Un, saying that there is a "substantial chance" that the scheduled date of June 12 will not work out. Mr. Trump made that comment while meeting with South Korean president Moon Jae-in.

The market maintained its slim opening gain immediately following the president's press conference, but his comments, which didn't exactly serve to strengthen Monday's narrative that U.S.-China trade tensions are easing, likely helped fuel some selling in the late afternoon. The S&P 500 was up around 0.1%-0.2% through the morning, but started trending lower in the final hour and a half of trading. Thin trading conditions and technical factors also likely contributed to the late sell off.

Seven of eleven S&P 500 sectors finished Tuesday in the red, with industrials (-1.3%), energy (-1.3%), and materials (-0.9%) closing at the very bottom of the sector standings. The consumer discretionary sector also underperformed, losing 0.5%, as retailers sold off following the latest round of earnings, which actually came in better-than-expected. TJX (TJX 87.45, +2.75) jumped 3.3% after reporting its quarterly results, while Kohl's (KSS 60.61, -4.86), Advance Auto (AAP 115.33, -3.82), and AutoZone (AZO 602.00, -63.09) lost between 3.2% and 9.5%.

On a positive note, the heavily-weighted financial sector was the top-performing group on Tuesday with a gain of 0.6%. Reports that Wall Street could see some regulatory relief from the Volcker Rule (ban on proprietary trading) helped underpin the group. Also, the House of Representatives debated the Dodd-Frank reform bill on Tuesday, and a vote is expected to take place on Tuesday evening.

Investors did not receive any economic data on Tuesday.

  • Nasdaq Composite +6.9% YTD
  • Russell 2000 +5.8% YTD
  • S&P 500 +1.9% YTD
  • Dow Jones Industrial Average +0.5% YTD
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