Day Traders Diary


Stocks took another beating on Wednesday, with losses accelerating into the closing bell. The S&P 500 lost 3.1%, completely wiping out its gains for the year. The Dow Jones Industrial Average also fell into the red for the year, dropping 608 points, or 2.4%, and the Nasdaq Composite lost 4.4%.

There was little room to hide on Wednesday, as the communication services (-4.9%) and information technology (-4.4%) sectors led eight of the 11 S&P groups significantly lower. The only three sectors to advance were the defensive-oriented consumer staples (+0.5%), real estate (+1.1%), and utilities (+2.3%) groups.

Stocks initially opened flat, but soon began ticking lower before doing a nose dive in the late afternoon.

AT&T (T 30.36, -2.66, -8.1%) and Texas Instruments (TXN 92.01, -8.24, -8.2%) weighed on their respective communication services and information technology sectors with disappointing earnings reports on Wednesday. Telecom giant AT&T missed earnings expectations, citing its recent acquisitions and accounting changes. Likewise, chipmaker Texas Instruments reported below-consensus revenue and issued a Q4 earnings warning, acknowledging that demand has slowed for its products across most markets.

Texas Instruments' earnings warning weighed on chipmakers, as investors expressed concerns over a potential economic slowdown that could be prolonged if macro issues, like a trade war with China, worsen. STMicroelectronics (STM 13.69, -2.18) also fell, losing 13.7%, after lowering its guidance, and the Philadelphia Semiconductor Index dropped 6.6% -- now down 16.1% for the month.

However, Dow component Boeing (BA 354.65, +4.60, +1.3%) reported better-than-expected top and bottom lines and raised its earnings guidance, giving futures and the Dow a boost in early action. The defense company's upbeat report, however, was construed as company-specific news, as the Dow and industrials sector (-3.4%) quickly rolled over. Boeing closed a ways off its high (+4.2%).

Disappointing New Home Sales for September (553,000 actual vs 625,000 consensus) helped accelerate losses in the morning, and selling steepened after the Fed indicated in its Fed Beige Book for September that manufacturing prices continued to rise, attributed to tariffs. On a positive note, the Fed reported that economic activity grew at a modest to moderate pace.

Separately, Treasuries ended Wednesday on a higher note again, as the increase in demand for the "risk-free" assets continued to push yields down from recent multi-year highs. The Fed-sensitive 2-yr yield closed two basis points lower at 2.86%, and the benchmark 10-yr yield closed four basis points lower at 3.12%.

In politics, police intercepted bombs mailed to high-profile Democrats, including former President Barack Obama and former presidential candidate Hillary Clinton, as well as CNN.

Reviewing Wednesday's economic data, which included the weekly Mortgage Applications Index, the FHFA Housing Price Index for August, and New Home Sales for September:
  • New home sales declined 5.5% month-over-month in September to a seasonally adjusted annual rate of 553,000 ( consensus 625,000). That was the weakest pace since December 2016 and it followed on the heels of a sharp downward revision for August to 585,000 (from 629,000).
    • The key takeaway from the report is that it underscores how demand is being impacted by rising mortgage rates. Median and average home prices were both down year-over-year, yet that didn't seem to provide much of a lift for new home sales.
  • FHFA Housing Price Index for August increased 0.3%, lower than the revised 0.4% increase in July (from 0.2%).
  • The weekly Mortgage Applications Index rose 4.9%.
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