Day Traders Diary



The S&P 500 tumbled 1.7% on Monday, as a rout in widely-held tech stocks led the broader market lower. A lack of leadership and the continued inclination to sell into strength have translated into a lack of buying interest.

Meanwhile, the Dow Jones Industrial Average dropped 1.6%, the Nasdaq Composite dropped 3.0%, and the Russell 2000 dropped 2.0%.

The S&P information technology sector (-3.8%) was the main problem on Monday. It has been prone to liquidation efforts that have aimed to reduce exposure to a crowded sector running into concerns about a cyclical slowdown, valuations, and increased regulatory scrutiny. The tech group leads all 11 S&P sectors lower in November with a monthly loss of 5.5%.

Apple (AAPL 185.86, -7.67, -4.0%) shares took a hit after a Wall Street Journal report indicated the company cut its production orders for all three new iPhones it launched in September. Regarding the iPhone XR, Apple reportedly slashed its production plan by up to a third of the approximately 70 million units it had asked some suppliers to produce between September and February. Apple stock has been under pressure since providing a disappointing outlook for the holiday quarter on November 1.

Negative sentiment surrounding Apple trickled down to its suppliers and chip stocks in general. Suppliers Qorvo (QRVO 63.15, -3.17, -4.8%), Lumentum (LITE 39.44, -3.08, -5.0%), and Skyworks Solutions (SWKS 70.76, -2.19, -3.0%), all of which cut their guidance this month over presumed weakened demand for iPhones, greatly underperformed. Similarly, the Philadelphia Semiconductor Index posted a loss of 3.9%, in which NVIDIA (NVDA 144.70, -19.73) extended its post-earnings decline with a steep loss of 12.0%.

Facebook (FB 131.55, -7.98, -5.7%), Netflix (NFLX 270.60, -15.61, -5.5%), Alphabet (GOOG 1020.00, -41.49, -3.9%), and Amazon (AMZN 1512.29, -81.12, -5.1%) also suffered notable losses, helping pull the communication services (-2.6%) and consumer discretionary (-2.7%) sectors lower.

Facebook shares continued to struggle amid on-going negative publicity surrounding the social network. CEO Mark Zuckerberg was reportedly not happy with COO Sheryl Sandberg for the reaction to the Cambridge Analytical scandal, according to a WSJ report. Also in the report, Mr. Zuckerberg's newly-adopted, aggressive leadership style has not fared well with key executives, some of whom have resigned. 

Conversely, the utilities (+0.5%) and real estate (+0.3%) sectors helped provide some comfort for the broader market, and the heavily-weighted financial space outperformed, settling near its unchanged mark. The oil-sensitive energy group (-0.1%) found some reprieve from WTI crude rising 1.4% to $57.31/bbl, which held onto a rebound effort after what many saw as a short-term oversold condition in crude prices last week.

In other news, CNBC reported that China regulators approved Dow component Walt Disney's (DIS 115.42, -0.77, -0.7%) acquisition of 21st Century Fox (FOXA 48.91, +0.75, +1.6%) on Monday. China's unconditional approval joins conditional agreements already made from the U.S. and EU, though the deal still needs regulatory consent from several more countries. 

Separately, Treasuries advanced amid the market sell-off, extending the recent decline in yields. The 2-yr yield lost three basis points to 2.77%, and the 10-yr yield lost two basis points to 3.06% -- 19 basis points lower from its November high. Also, the U.S. Dollar Index declined 0.3% to 96.21.

Overseas, the Asia-Pacific Communications Summit concluded on Sunday without the release of a joint communique due to the ongoing trade disagreement between United States and China. Elsewhere, Chairman of Renault-Nissan-Mitsubishi Carlos Ghosn was arrested in Japan for alleged financial violations.

In Europe, British Prime Minister Theresa May said that removing her from her post would lead to a delay in Brexit, making talks more difficult. Nevertheless, Brexit drama has yet to become a major issue for the U.S. stock market.

Reviewing Monday's sole economic report, the NAHB Housing Market Index for November:

  • The NAHB Housing Market Index for November came in at 60 ( consensus 68), down from 68 in October. That's the lowest reading since August 2016, according to CNBC.
    • A number above 50 still denotes a positive outlook, yet the sharp drop fed into concerns about rising mortgage rates driving a weakening in housing market activity as they create affordability constraints for prospective home buyers.

Looking ahead, investors will receive Housing Starts and Building Permits for October on Tuesday.

  • Nasdaq Composite +1.8% YTD
  • Dow Jones Industrial Average +1.2% YTD
  • S&P 500 +0.6% YTD
  • Russell 2000 -2.5% YTD

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