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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Day Traders Diary

6/19/18

 

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:

  • Housing starts rose to a seasonally adjusted annualized rate of 1.350 million units in May (Briefing.com consensus 1.323 million), up from a revised 1.286 million units in April (from 1.287 million).
  • Building permits declined to a seasonally adjusted 1.301 million in May (Briefing.com consensus 1.343 million) from a revised 1.364 million in April (from 1.352 million).
    • The key takeaway from the report is that permits -- a leading indicator -- declined for both single-family units (-2.2%) and multi-unit dwellings (-8.8%), suggesting there might not be follow-on strength for badly needed single-family homes in June.

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.

  • Nasdaq Composite +11.9% YTD
  • Russell 2000 +10.3% YTD
  • S&P 500 +3.3% YTD
  • Dow Jones Industrial Average -0.1% YTD
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Headlines provided by Briefing.com

 

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