Day Traders Diary
The S&P 500 closed Tuesday on stronger footing after tumbling as low as 2.2% in early morning trading. Discouraging price action in foreign markets and some disappointing earnings contributed to early negative sentiment, but the benchmark index gradually recouped intraday losses, finishing lower by 0.6%. There was a prevailing sense that the morning's sell-off had left the market in an oversold condition on a short-term basis.
Meanwhile, the Dow Jones Industrial Average lost 0.5%, the Nasdaq Composite lost 0.4%, and the Russell 2000 lost 0.8%.
Overseas, Asian and European indices closed notably lower on Tuesday with several developments causing concern. For instance, Japan's Nikkei lost 2.7%, as Japan's finance minister said he expects a planned sales tax increase next October to cause some disruptions. In Europe, Germany incited inflationary worries after reporting a 3.2% year-over-year increase in its Producer Price Index, and the EU rejected Italy's budget plan to increase its deficit spending to 2.4% of GDP in 2019. The Euro Stoxx 50 fell 1.5%.
Back on the home front, disappointing earnings reports from Dow components 3M (MMM 192.55, -8.81) and Caterpillar (CAT 118.98, -9.73) heightened worries that earnings growth may have peaked and weighed on the industrial sector, which lost 1.6%. 3M reported lower-than-expected top and bottom lines and also lowered its earnings guidance. Meanwhile, Caterpillar drew attention to higher material and freight costs, including tariffs. Shares of 3M lost 4.4%, and Caterpillar shares fell 7.6%.
Nevertheless, the relative strength in the communication services (+0.4%) and consumer discretionary (-0.1%) sectors provided some support, helping to fuel Tuesday's intraday rebound. Dow component McDonald's (MCD 177.15, +10.52, +6.3%) helped lift the consumer discretionary sector after it reported above-consensus top and bottom lines. Meanwhile, Verizon (VZ 57.21, +2.23, +4.1%) led the communication services sector higher after it reported better-than-expected earnings.
Also in earnings, aircraft manufacturing company United Tech (UTX 130.02, +3.62, +2.9%) reported above-consensus profit and revenue. Similarly, home construction company PulteGroup (PHM 22.40, +1.52, +7.3%) lifted housing stocks after it also surpassed top and bottom line expectations.
The oil-sensitive energy group was the worst-performing sector on Tuesday, losing 2.7%, after Saudi Arabia pledged to play a "responsible role" in the energy markets. Likewise, WTI crude responded, settling 4.2% lower at $66.53/bbl -- its lowest price since August.
In other markets, U.S. Treasuries had surged in the early going amid the equity sell-off, but lost some steam as the market rebounded, pushing yields up from intraday lows. The 10-yr yield finished three basis points lower at 3.17%, but was down as much as eight basis points. Meanwhile, gold, another safe-haven asset, climbed 1.0% to $1,236.80/oz, nearing a three-month high.
Investors did not receive any economic data on Tuesday. Looking ahead, investors will receive the weekly MBA Mortgage Applications Index, the FHFA Housing Price Index for August, New Home Sales for September, and the Beige Book for September on Wednesday.