Day Traders Diary

7/2/18

A tech-charged afternoon rally saved the U.S. equity market from kicking off the abbreviated Fourth of July week on a lower note. The S&P 500 advanced 0.3%, closing at its best mark of the day and about eight points above its 50-day moving average. The Dow added 0.2%, the Nasdaq jumped 0.8%, and the Russell 2000 climbed 0.7%.

Trade tensions were heightened on Monday morning after President Trump said over the weekend that he will not back down on China tariffs. Separately, the European Union warned that it would impose tariffs on nearly $300 billion worth of American goods if the U.S. follows through with duties on EU automobiles. Mr. Trump said U.S. and EU officials will be meeting fairly soon to try to "work something out."

On Wall Street, the trade war rhetoric led stocks lower at the opening bell; the S&P 500 was down as much as 0.7%. However, the market started retracing some losses soon thereafter, and then the top-weighted technology sector led a full-fledged rebound in the afternoon.

The tech space -- which represents a quarter of the broader market -- finished atop Monday's sector standings with a gain of 1.0%. Tech giants like Apple (AAPL 187.18, +2.07), Microsoft (MSFT 100.01, +1.40), Facebook (FB 197.36, +3.04), and Alphabet (GOOG 1127.46, +11.81) added between 1.1% and 1.6%.

In total, seven of eleven sectors finished in the green. The utilities space (+0.8%) closed right behind technology, and the heavily-weighted financial group (+0.7%) also had a strong outing. On the flip side, the energy sector (-1.6%) finished at the bottom of the leaderboard, with consumer staples (-0.5%) being the next-worst performer.

The energy sector's decline came amid a modest sell off in the crude oil futures market, which was under pressure after President Trump said he's struck a deal with Saudi Arabia to increase output by up to two million barrels per day. WTI crude futures ended lower by 0.3% at $73.94 per barrel.

In corporate news, Tesla (TSLA 355.07, -7.88) got off to a good start, adding as much as 6.4%, after CEO Elon Musk said the electric automaker hit its long-elusive production target of 5,000 Model 3 vehicles per week in the last seven days of the second quarter, but shares quickly reversed course, eventually ending lower by 2.3%.

Elsewhere, U.S. Treasuries slipped on Monday, pushing yields higher across the curve; the benchmark 10-yr yield climbed to 2.87% from 2.85%. Meanwhile, the U.S. Dollar Index rallied 0.5% to 94.70, and the CBOE Volatility Index was up as much as 23.2%, but finished lower by 2.1% at 15.76.

Reviewing Monday's economic data, which was limited to the ISM Manufacturing Index for June and the Construction Spending report for May:

• The ISM Index for June increased to 60.2 from an unrevised reading of 58.7 in May, while the Briefing.com consensus expected a reading of 58.5.
  • The key takeaway from the report is that it reflects continued strength in the manufacturing sector with the Prices Index sitting just below its best level in more than seven years.
• Construction Spending rose 0.4% in May, while the Briefing.com consensus expected an increase of 0.6%. The April reading was revised to +0.9% from +1.8%.
  • The key takeaway from the report is that, combined with the downward revision for April, construction spending will make a smaller contribution to Q2 GDP forecasts than what was originally expected.

Looking ahead, Tuesday's trading session will end early (1:00 PM ET), and markets will be closed on Wednesday for the Fourth of July.

• Nasdaq Composite +9.6% YTD
• Russell 2000 +7.8% YTD
• S&P 500 +2.0% YTD
• Dow Jones Industrial Average -1.7% YTD

• • •  
  • Headlines provided by Briefing.com