Day Traders Diary



Stocks cruised considerably higher on Tuesday, ignited by strong earnings at the open and then fueled by a resurgence in the heavily-weighted information technology sector (3.0%) throughout the day. The S&P 500 rocketed through its 200-day moving average, closing 2.2% higher and reducing its October loss to 3.6%.

As for the other major averages, the Dow Jones Industrial Average jumped 2.2%, the Nasdaq Composite surged 2.9%, and the Russell 2000 advanced 2.8%. The Dow and the Nasdaq both closed above their 200-day moving averages, but the Russell 2000 did not.

Investor sentiment was buoyed after several financial and health care giants reported upbeat earnings.

Investment banks Goldman Sachs (GS 221.70, +6.48, +3.0%) and Morgan Stanley (MS 45.94, +2.47, +5.7%) helped boost the financial sector (+1.6%) after reporting better-than-expected top and bottom lines. Asset management firm BlackRock (BLK 408.00, -18.94, -4.4%) weighed on the sector, though, after missing revenue expectations. BlackRock's pain worsened when CEO Larry Fink said that the company saw more than $30 billion of institutional non-ETF index equity outflows that were driven by client de-risking. Mr. Fink added that he thinks clients will continue to de-risk.

Health care sector (+2.9%) components Johnson & Johnson (JNJ 136.56, +2.61, +2.0%) and UnitedHealth (UNH 272.57, +12.32, +4.7%) contributed to the group's strong performance after better-than expected results. The health care sector is the second-best performing group this year with a 2018 gain of 12.5%; tech leads with a gain of 13.9%.

The tech sector "returned to form" on Tuesday when investors flocked to the high-growth assets that some considered to be oversold on a short term basis. Adobe Systems (ADBE 260.67, +22.66) had a very strong performance after it reaffirmed fourth quarter guidance and said it expects FY19 revenues to be up 20%. The software company led the S&P 500 with a gain of 9.5%.

Likewise, chip stocks outperformed, as the Philadelphia Semiconductor Index climbed 3.3%. Notable gainers included Intel (INTC 45.94, +1.41, +3.2%), Qualcomm (QCOM 66.12, +1.95, +3.0%), and NVIDIA (NVDA 245.83, +10.45, +4.4%). However, today's impressive performance brings the PHLX Index's yearly gain to just 2.4%.

Adding to Tuesday's gains was the communication services (+2.3%) sector, led by FANG members Alphabet (GOOG 1121.28, +29.03, +2.7%), Facebook (FB 158.78, +5.26, +3.4%), and Netflix (NFLX 346.40, +13.27, +4.0%). Conversely, laggards in the all-green sector standings were energy (+0.9%), consumer staples (+1.1), and utilities (+1.2%). The defensive-oriented utilities sector remains the only sector in October with monthly gains (+2.1%).

Separately, other markets remained mostly dormant on Tuesday. Treasuries barely moved, subduing current fears of rising interest rates for now. The Fed-sensitive 2-yr yield added one basis point to 2.86%, while the benchmark 10-yr yield declined one basis point to 3.16%. The U.S. Dollar Index traded near its flat line (94.77), and WTI crude settled 0.1% higher at $71.91/bbl with investors keeping an eye on U.S.-Saudi-Arabia tensions. The CBOE Volatility Index (VIX) fell 16.1% to 17.87, retreating from last week's seven-month high.

Reviewing Tuesday's economic data, which included Industrial Production and Capacity Utilization for September, Jobs Openings for August, and the NAHB Housing Market Index for October:

  • Industrial Production rose 0.3% in September ( consensus +0.3%), while the August increase was unrevised at 0.4%. Meanwhile, Capacity Utilization came in at 78.1% ( consensus 78.2%), unchanged from unrevised reading of 78.1% in August.
    • The key takeaway from the report is that it revealed the strongest year-over-year growth rate in industrial production (+5.1%) since December 2010.
  • The NAHB Housing Market Index for October came in at 68 ( consensus 67), up from 67 in September.
  • The August Job Openings and Labor Turnover Survey showed that job openings increased to 7.136 million from a revised 7.077 million (from 6.939 million) in July.

On Wednesday, investors will receive the weekly Mortgage Applications Index, Housing Starts and Building Permits for September, and the minutes from the September FOMC meeting.

  • Nasdaq Composite +10.8% YTD
  • S&P 500 +5.1% YTD
  • Dow Jones Industrial Average +4.4% YTD
  • Russell 2000 +4.0% YTD
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