Day Traders Diary
The S&P 500 lost 0.2%, but was able to fight back after being down as much as 2.9% earlier in the session. The Dow Jones Industrial Average lost 0.3% after being down as many as 785 points or 3.1%. The Nasdaq Composite added 0.4%, yet it had been down as many as 174 points or 2.4%.
The major indices suffered steep losses in the early going after news of the arrest of Huawei Technologies' CFO fueled concerns about U.S.-China trade negotiations. Investor sentiment reversed course after European markets closed, however, and kicked into overdrive late in the day following a Wall Street Journal report that suggested the Federal Reserve might be more cautious-minded about raising interest rates following its December FOMC meeting.
News surfaced Wednesday that Huawei CFO Meng Wanzhou was arrested in Canada Dec. 1 amid allegations the company violated U.S. trade sanctions on Iran. Ms. Meng is expected to be extradited to the U.S. to face the charges. Her arrest invited worries about potential retaliation against U.S. companies doing business in/with China. In a broader context, the sense that there might not be a trade deal fueled global growth concerns.
Those concerns, and the sharp selling in the stock market off the open, fueled a flight-to-safety in the Treasury market that pushed yields noticeably lower across the curve. The 2-yr yield dropped three basis points to 2.77% after hitting 2.68% intraday. The 10-yr yield dropped five basis points to 2.87% after hitting 2.82% intraday. The backtracking in the Treasury market also coincided with the close of European markets and the rebound effort in the stock market.
On a related note, Atlanta Fed President Bostic (FOMC voter) said he thinks the fed funds rate is within shouting distance of neutral, which followed previous remarks from Dallas Fed President Kaplan (non-FOMC voter) who suggested the fed funds rate is a little bit below neutral.
In other developments, JPMorgan Chase (JPM 105.19, -2.04, -1.9%) CEO Jamie Dimon shared some typically practical viewpoints in a CNBC interview that helped provide a measure of support for an oversold stock market. Mr. Dimon said he realizes the China trade issue is the main source of market volatility right now, but believes there could be enough progress in trade talks in the next 90 days to create, or push out, another deadline. He did acknowledge, though, that the trade uncertainty is not a good thing.
Regarding interest rates, Mr. Dimon believes the world is better off with the U.S. growing and rates going up because of that growth than it is with the U.S. being in a recession and rates going down because of it. He thinks if there is a bubble anywhere it is in U.S. government bonds.
Within the S&P 500, the energy (-1.8%), financials (-1.5%), materials (-1.4%), and industrial (-0.6%) sectors underperformed the broader market.
The oil-sensitive energy group fell in tandem with oil prices. WTI crude fell 3.0% to $51.56/bbl amid reports that Saudi Arabia is floating an idea for OPEC to cut production less than the market expected.
WTI crude was able to finish off session lows, though, as the weekly crude inventory report from the Energy Information Administration showed a decline in crude stockpiles for the first time since September. Crude oil inventories had a draw of 7.3 million barrels. Also, Saudi Arabia is reportedly waiting to hear from Russia before advancing any formal production cut agreement. An official communique from OPEC is expected sometime on Friday.
Financial stocks were set back amid the continued decline in U.S. Treasury yields, but like most stocks today, they were able to recoup major losses. Citigroup (C 60.06, -2.20, -3.5%) was an influential drag after its CFO said the bank no longer expects year-over-year revenue growth for its markets business in the fourth quarter. In addition, Citigroup expects to fall slightly short of its stated goal of achieving 100 basis points of improvement in year-over-year operating efficiency.
Conversely, the real estate (+2.7%), communication services (+1.0%), consumer discretionary (+0.6%), and information technology (+0.2%) sectors all finished in the green on Thursday.
Strong finishes from many of the FAANG stocks helped lift the broader market, which rallied sharply into the close on broad-based buying interest. Facebook (FB 139.63, +1.70), Netflix (NFLX 282.88, +7.55), Alphabet (GOOG 1068.73, +17.91), and Amazon (AMZN 1699.19, +30.79) all rose between 1.2% and 2.7%, Meanwhile, Apple (AAPL 174.72, -1.97) traded lower with a loss of 1.1%, but was able to close near its session high.
In earnings news, Hewlett Packard Enterprise (HPE 16.02, +0.97, +6.5%) was one of the top-performing stocks in the S&P 500 after it beat top and bottom line estimates.
Reviewing Thursday's economic data, which included the Trade Balance for October, Q3 Nonfarm Productivity and Unit Labor Costs, weekly Initial and Continuing Claims, Factory Orders for October, and ISM Services for November, and the ADP Employment Change Report for November:
Looking ahead, investors will receive the Employment Situation Report for November, the Preliminary Reading for the University of Michigan Index of Consumer Sentiment for December, Wholesale Inventories for October, and Consumer Credit for October on Friday.