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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

8/31/18

 

Friday's trading session -- the last session ahead of an extended Labor Day weekend -- was an eventful one in terms of trade-related headlines, but a largely uneventful one for the major averages, which finished roughly flat. The S&P 500 (unch) added less than a point, the Nasdaq Composite (+0.3%) advanced modestly, and the Dow Jones Industrial Average (-0.1%) finished slightly lower.

All eyes were on Washington, where U.S. and Canadian officials were scrambling to get a trade deal done by President Trump's end of Friday deadline. The two sides weren't able to reach an agreement, but the White House then said talks will extend into next week. The extension was unexpected, as President Trump has said he'd be willing to move on without Canada if a deal wasn't in place by Friday.

Nonetheless, the news helped the market recover modest losses from earlier in the day, which were extended after The Toronto Star released "off the record" remarks that President Trump made during a Bloomberg interview on Thursday, including an acknowledgement that he's not making any compromises in the trade talks with Canada.

U.S. Trade Representative Robert Lighthizer announced late in the afternoon that President Trump has officially notified Congress that he wants to sign a trade agreement with Mexico, which agreed to a bilateral deal with the U.S. on Monday, and potentially Canada, in 90 days. The deals are aimed at replacing the North American Free Trade Agreement, which has been in place since 1994.

As for the 11 S&P 500 sectors, almost all of them finished within 0.5% of their unchanged marks. The energy sector (-0.7%) was the lone exception, falling in tandem with the price of crude oil; WTI crude futures slid 0.5% to $69.84/bbl. Energy finished August at the bottom of the sector standings with a monthly loss of 3.8%; for comparison, the S&P 500 added 3.0%.

In earnings news, lululemon athletica (LULU 154.93, +17.93) and Ulta Beauty (ULTA 260.00, +15.59) advanced 13.1% and 6.4%, respectively, after releasing their quarterly results, but Big Lots (BIG 43.05, -4.81) dropped 10.1% after reporting lower-than-expected profits and guidance for FY19.

Looking at other markets, U.S. Treasuries advanced, pushing yields lower across the curve, with the benchmark 10-yr yield slipping one basis point to 2.85%; the U.S. Dollar Index climbed 0.4% to 95.05, its best level in a week; and the CBOE Volatility Index, often referred to as the "investor fear gauge", slid 3.2% to 13.10.

Reviewing Friday's economic data, which included the Chicago PMI for August and the final reading for the University of Michigan Consumer Sentiment Index for August:

  • The Chicago PMI for August hit 63.6 (Briefing.com consensus 63.0), down from an unrevised 65.5 in July.
    • Despite the dip, the key takeaway from the August report is that manufacturing activity in the Chicago Fed region remains robust.
  • The final reading of the University of Michigan Consumer Sentiment Index for August ticked up to 96.2 (Briefing.com consensus 95.5) from 95.3 in the preliminary reading.

U.S. markets will be closed on Monday in celebration of Labor Day.

  • Nasdaq Composite +17.5% YTD
  • Russell 2000 +13.4% YTD
  • S&P 500 +8.5% YTD
  • Dow Jones Industrial Average +5.0% YTD

Week In Review: Going Deeper Into Record Territory

After returning to record territory last Friday, the S&P 500 trekked even higher this week, adding 0.9% in total. The tech-heavy Nasdaq outperformed, adding 2.1%, and the Dow also advanced, tacking on 0.7%. Investors dealt with a flurry of trade-related headlines this week, especially in regards to NAFTA negotiations.

The U.S. and Mexico reached a bilateral trade deal on Monday, a headline that sent Wall Street to new all-time highs. Canada then entered the discussions to try to work out a deal with the United States, but the two sides weren't able to reach an agreement by President Trump's Friday deadline. However, the White House said late on Friday that talks will resume next week.

In other trade-related news, Wall Street registered its only loss of the week on Thursday following reports that President Trump wants to move forward with tariffs on $200 billion worth of Chinese goods as early as next week. In addition, the president said in a Bloomberg interview that the EU's offer to eliminate auto tariffs does not go far enough and compared the EU's trade policies to those of China.

Meanwhile, on the earnings front, investors once again received quarterly results from a number of retailers this week, including results from well-known companies like Dollar General (DG), Best Buy (BBY), lululemon athletica (LULU), Dollar Tree (DLTR), Ulta Beauty (ULTA), Tiffany & Co (TIF), and Burlington Stores (BURL).

The results came in mostly better-than-expected, but guidance was more mixed, leaving the SPDR S&P Retail ETF (XRT) with a modest weekly gain of 0.3%.

Away from earnings, Amazon (AMZN) climbed to new records and crossed the $2000 mark for the first time ever after Morgan Stanley raised its target price for the online retail giant to $2500 -- a new Street high. Meanwhile, Apple (AAPL) also hit new records, helped by investing legend Warren Buffett, who said he's recently bought more shares of the world's largest tech company.

Tesla (TSLA) also made headlines, moving lower after its CEO, Elon Musk, announced that he's abandoned plans to take the electric automaker private.

As for the sector standings, seven groups finished the week in the green and four groups finished in the red. The top-performing sectors were technology (+2.0%), consumer discretionary (+1.8%), and health care (+1.0%). Conversely, telecoms (-1.7%), consumer staples (-0.5%), and utilities (-0.6%) finished at the back of the pack.

Also of note, there were some important pieces of economic data released this week, including the second estimate of Q2 GDP (+4.2% actual vs +4.0% Briefing.com consensus) and the July reading of the core PCE Price Index (+0.2% actual vs +0.2% Briefing.com consensus), which is the Fed's preferred measure of inflation. Neither report elicited much of response from the stock market though.

 

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  • Headlines provided by Briefing.com
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