Day Traders Diary
Wall Street had a mixed outing on Friday, with the underperformance of financial and technology shares balancing gains most elsewhere. The Dow Jones Industrial Average climbed 0.3%, closing at a new all-time high for the second day in a row. The S&P 500 finished slightly below its flat line, and the tech-heavy Nasdaq lost 0.5%.
For the week, the S&P 500 and the Dow added 0.9% and 2.3%, respectively, while the Nasdaq lost 0.3%.
The top-weighted information technology sector lost 0.3% on Friday, capping an unimpressive week overall. Within the group, Micron (MU 44.74, -1.32) was among the worst performers, falling 2.9% after its above-consensus earnings report was overshadowed by disappointing guidance for the current quarter -- due in part to tariffs.
Meanwhile, the influential financial sector ended a positive week on a disappointing note. The group lost 0.4% on Friday, trimming its weekly gain to 2.3%, as Treasuries ticked higher, pushing yields slightly lower. The benchmark 10-yr yield, for instance, slipped one basis point to 3.07%, but remained near a four-month high.
On a positive note, the lightly-weighted telecom services group finished atop the sector standings with a gain of 1.0%. Within the group, AT&T (T 33.78, +0.34) advanced 1.0% after being upgraded to 'Buy' from 'Neutral' at UBS. However, shares gave back some gains in the late afternoon following reports that President Trump is pressing the Department of Justice to breakup the wireless giant.
There was some volatility during the final stretch of Friday's session due to a major sector rebalancing, which will result in a new 'Communication Services' sector.
Several widely-held technology, telecom, and media stocks will be reclassified into this group, including Facebook (FB 162.93, -3.09, -1.9%), Alphabet (GOOG 1166.09, -20.78, -1.8%), Verizon (VZ 54.42, +0.47, +0.9%), Netflix (NFLX 361.19, -4.17, -1.1%), and Walt Disney (DIS 110.40, -1.22, -1.1%).
Also adding to the volatility, Friday was a quadruple witching day -- when futures and options on both indices and individual stocks expire.
In the crude oil market, WTI crude futures finished up 0.8% at $70.77/bbl, but were volatile after Reuters reported that OPEC and non-OPEC producers are discussing the possibility of raising output by 500,000 barrels a day to counter falling supply from Iran due to U.S. sanctions. OPEC and non-OPEC nations are scheduled to meet in Algeria on Sunday.
Investors did not receive any notable economic data on Friday, and Monday's economic calendar is also blank.
Week In Review: Dow Shrugs Off Tariffs, Returns to Record Territory
Wall Street rallied this week with investors shrugging off another tranche of U.S. tariffs on Chinese goods. The S&P 500 and the Dow touched new records -- the first time that's happened for the Dow since January 26 -- and finished the week with respective gains of 0.9% and 2.3%. The Nasdaq lagged though, slipping 0.3%.
President Trump announced on Monday evening that the U.S. will be slapping tariffs on $200 billion worth of Chinese goods starting on September 24. The tariff rate will start at 10%, but will increase to 25% on January 1. The president also said he will impose additional tariffs on $267 billion worth of Chinese goods if Beijing retaliates -- which it vowed to do with 5-10% tariffs on $60 billion worth of U.S. goods.
Stocks unexpectedly took off on Tuesday following the tariff announcement, with some analysts pointing to the fact that the initial 10% tariff rate by the U.S. was not as harsh as expected -- thereby reflecting a willingness to negotiate. Others said the rally reflected the market's belief that the U.S.-China trade dispute will eventually die down. Short-covering activity likely helped as well.
The heavily-weighted financial sector was among the top-performing groups this week with a gain of 2.3%, benefiting from a steepening of the yield curve. The yield on the benchmark 10-yr Treasury note climbed seven basis points to end Friday at 3.07%, while the Fed-sensitive 2-yr yield jumped two basis points to 2.81%.
Conversely, the top-weighted information technology sector (-0.1%) underperformed this week, getting surpassed by consumer discretionary (+0.4%) for the top spot in the 2018 sector standings. The two groups hold year-to-date gains of 18.5% and 18.7%, respectively. For comparison, the S&P 500 is up 9.6%.
In total, eight of the eleven S&P sectors finished in the green, with cyclical sectors showing relative strength. A new sector, communication services, will be born after Friday's close, and it will involve reclassifying several widely-held technology, telecom, and media stocks into the new sector -- including Facebook (FB), Alphabet (GOOG), Verizon (VZ), Netflix (NFLX), and Walt Disney (DIS).
In individual stocks, cannabis names were in focus this week, with Tilray (TLRY) going on a wild ride after its CEO suggested that his business would be a "smart hedge" for major pharmaceutical companies. TLRY shares traded as high as $299.46/share -- 175% above last Friday's close -- before ending the week at $123.00/share (+13%).
On the oil front, WTI crude climbed 2.6% this week to $70.77/bbl even though President Trump criticized OPEC on Thursday morning, saying the "OPEC monopoly must get [oil] prices down now!" Reuters then reported on Friday that OPEC and non-OPEC countries are discussing the possibility of raising output by 500,000 barrels a day to counter falling supply from Iran due to U.S. sanctions.
Looking ahead, the Federal Reserve will release its latest policy directive on Wednesday. The market is all but certain that the central bank will hike rates -- with the CME FedWatch Tool placing the chances at 100% -- so investors will be more focused on the Fed's rate forecast, especially for 2019.
- Headlines provided by Briefing.com