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Leigh Baldwin & Co.

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Day Traders Diary

11/27/18

 

The S&P 500 recouped losses to finish with a gain of 0.3% in a volatile session on Tuesday. The stock market was able to shrug off early angst caused by President Donald Trump reiterating his hard-nosed tariff stance. President Trump's comments struck concerns that his G-20 meeting with President Xi Jinping at the end of the week might not meaningfully ease trade tensions between the two countries.

Meanwhile, the Dow Jones Industrial Average gained 0.4%, the Nasdaq Composite finished flat, and the Russell 2000 underperformed with a loss of 0.9%.

Specifically, President Trump said in a Wall Street Journal interview that it is "highly unlikely" he will refrain from raising a 10% tariff on $200 billion of Chinese goods to 25%, effective January 1. He added, too, that if China and the U.S. don't make a deal he will move ahead with a plan to place a tariff of 10% or 25% on an additional $267 billion of imported Chinese goods, which would possibly include iPhones and laptop computers.

White House economic advisor Larry Kudlow followed up with his disappointment in China talks thus far and stated that talks between President Trump and President Xi will occur on Saturday evening. He added that President Trump will make up his mind on the $267 billion tariff tranche at the end of the meeting.

Subsequently, the trade-sensitive materials (-1.3%) and industrial (-0.2%) sectors underperformed the broader market. The energy group (-0.3%) also finished near the bottom of the sector standings.

Also contributing to the industrial sector's decline was United Tech (UTX 122.68, -5.30, -4.1%) after the company announced its intention to split into three independent companies. Investors seemed bothered by the cost associated with dividing the company, which will include the spin-off of the Otis and Carrier businesses. The decision came after United Tech acquired Rockwell Collins earlier this month.

Apple (AAPL 174.24, -0.38, -0.2%) never traded in positive territory after the President's comments reminded investors that tariffs remain a headwind for the company. Microsoft (MSFT 107.14, +0.67, +0.6%) helped lift the heavily-weighted information technology sector (+0.2%), and chip stocks also rose, with the Philadelphia Semiconductor Index tacking on 0.2%.

On the other hand, the stock market assumed a defensive tone on Tuesday with the defensive-oriented health care (+1.0%), utilities (+0.9%), and consumer staples (+0.9%) sectors finishing with strong gains. The real estate (+0.6%) and communication services (+0.6%) sectors also had solid showings.

Separately, General Motors (GM 36.69, -0.96) fell 2.6% after President Trump tweeted he is disappointed in GM and is looking to cut all of its subsidies. Mr. Trump's frustration stemmed from GM's decision to close plants in Ohio, Michigan, and Maryland but not those in Mexico or China. The White House is hopeful that General Motors will make some adjustments and does not believe GM's job layoffs will impact the overall economy.

In the bond market, U.S. Treasuries finished on a modestly higher note with the belly of the curve showing relative strength. The 2-yr yield was unchanged at 2.83%, and the 10-yr yield decreased two basis points to 3.06%.

Overseas, European equities finished modestly lower on Tuesday with Germany's DAX (-0.4%) showing relative weakness. Elsewhere, Asian equity markets finished mixed with China's Shanghai Composite unchanged.

Reviewing Tuesday's economic data which included the Conference Board's Consumer Confidence Index for November, the Case-Shiller 20-city Index for September, and the FHFA Housing Price Index for September:

  • The Conference Board's Consumer Confidence Index dipped to 135.7 in November (Briefing.com consensus 135.5) from 137.9 in October, which was the highest reading since September 2000.
    • The key takeaway from the report is that consumer confidence remains at historically strong levels due in large part to positive views on the labor market.
  • The Case-Shiller 10-city Index for September increased 5.1%, lower than the prior unrevised 5.5% increase in August.
  • FHFA Housing Price Index for September increased 0.2%, lower than the revised 0.4% increase in August (from 0.3%).

Looking ahead, investors will receive several economic reports on Wednesday: the FOMC Minutes for November; New Home Sales for October; Q3 GDP - Second Estimate; Advanced Readings for International Trade in Goods, Retail Inventories, and Wholesale Inventories for October; and the weekly MBA Mortgage Applications Index.

  • Nasdaq Composite +2.6% YTD
  • S&P 500 +0.3% YTD
  • Dow Jones Industrial Average +0.1% YTD
  • Russell 2000 -2.8% YTD
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  • Headlines provided by Briefing.com
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