Day Traders Diary
U.S. stocks retreated for a third consecutive session on Tuesday as U.S.-China trade tensions continued to weigh on sentiment. However, also for the third straight session, an intraday rebound made the close look notably better than the open. The S&P 500, for instance, was down 1.1% early on Tuesday, but settled lower by just 0.4%. Meanwhile, the Nasdaq and the Dow ended lower by 0.3% and 1.2%, respectively, while the Russell 2000 outperformed (+0.1%), ticking up to a new all-time high.
President Trump threatened to escalate trade tensions with China even further on Monday evening, asking his administration to identify an additional $200 billion worth of Chinese goods to be penalized with tariffs. The president says this new list of goods will be subject to tariffs of 10% if Beijing follows through on its promise to retaliate against planned U.S. tariffs of 25% on $50 billion worth of Chinese imports. In addition, if Beijing retaliates against the new $200 billion list, Mr. Trump said he will place tariffs on yet another $200 billion worth of Chinese goods.
The industrial sector, which is viewed as being in the crosshairs of protectionist trade actions, was the worst-performing S&P 500 group on Tuesday with a loss of 2.1%. Meanwhile, chipmakers, which derive a large chunk of their revenue from shipments to China, also underperformed, sending the Philadelphia Semiconductor Index lower by 1.2%. The top-weighted technology sector, which houses semiconductor names, settled with a loss of 0.7%, and the materials sector was also a notable laggard, dropping 1.8%.
In general, cyclical sectors underperformed their less-risky, countercyclical peers. For instance, the three aforementioned groups -- industrials, technology, and materials -- are all cyclical spaces, and the health care (+0.2%), consumer staples (+0.5%), utilities (+1.1%), and telecom services (+1.4%) groups, which finished in the green, are all countercyclical.
Within the health care space, Sarepta Therapeutics (SRPT 143.93, +38.69) spiked 36.8% after announcing positive trial results for its Duchenne muscular dystrophy (DMD) drug. The iShares Nasdaq Biotechnology ETF (IBB 112.04, +1.61) rallied 1.5%, hitting a three-month high.
Elsewhere, Tesla (TSLA 352.55, -18.28) dropped 4.9% after CEO Elon Musk revealed in a company email that a disgruntled employee conducted "extensive and damaging sabotage."
Outside of equities, U.S. Treasuries moved higher in a curve-flattening trade that left the 2-10 spread at its lowest level in more than a decade. The yield on the benchmark 10-yr Treasury note slipped three basis points to 2.89%, and the yield on the 2-yr Treasury note finished flat at 2.55%. Meanwhile, the U.S. Dollar Index rallied 0.3% to 94.67, and West Texas Intermediate crude futures dropped 1.2% to $64.90 per barrel.
Reviewing Tuesday's economic data, which was limited to Housing Starts and Building Permits for May:
Looking ahead, investors will receive on Wednesday the Existing Home Sales report for May (Briefing.com consensus 5.55 million), the Current Account Balance for the first quarter (Briefing.com consensus -$129.2 billion), and the weekly MBA Mortgage Applications Index.
Headlines provided by Briefing.com