Day Traders Diary



Thursday's stock market featured another tale of two sessions. The bulk of the trading day was marred by an inclination to sell into strength, which fed into worries that this market had more downside to come. The last part of the trading day, however, featured a huge rally from session lows that eviscerated the downbeat sentiment seen in the first part of the day.

The S&P 500, down as much as 2.8% at its low for the day, ended the session up 0.9% with all of its gains recorded within the last two hours of trading.

The Dow Jones Industrial Average (+1.1%), the Nasdaq Composite (+0.4%), and the Russell 2000 (+0.2%) also surged late in the day after being down as much as 2.7%, 3.3%, and 3.0%, respectively.

For most of the session, investor sentiment was hurt by the absence of any sector leadership, lingering growth concerns, the underperformance of cyclical groups, and the flight-to-safety to bonds.  Furthermore, there was an acute sense of disappointment that there was no follow through on Wednesday's historic rally.

Every sector was down and every major index was down. 

There wasn't much news really to account for the negative disposition, although growth concerns were a factor following the release of a weaker than expected Consumer Confidence report for December, an ECB economic bulletin that pointed to slower global growth in 2019, and the first decline in China's industrial profits (-1.8% yr/yr in November) in three years.

While those items made news, the disappointing price action was the main piece of news and the primary catalyst for the losses seen earlier in the day.

Everything turned on a dime, however, around 2:15 p.m. ET.  That's when the S&P 500 briefly dipped below 2400 and when buyers showed up again in droves.

Everything lifted at that point -- and quickly.  Just as before, the price action became the news, as the rebound seemingly came out of nowhere and lacked a headline driver.

The reversal in fortune was spurred in part by short-covering activity, although pension fund rebalancing activity garnered a good bit of attribution for the late-day spike that saw all 11 sectors end higher.

The materials (+1.9%), industrials (+1.2%), financials (+1.1%), and health care (+1.1%) groups led the broad market advance.

U.S. Treasuries closed on a higher note, pushing yields lower, before stocks mounted their late-inning rally. The 2-yr yield declined seven basis points to 2.53%, and the 10-yr yield declined five basis points to 2.74%. The U.S. Dollar Index lost 0.5% to 96.52.

Reviewing Thursday's economic data, which included the weekly Initial and Continuing Claims report, the Conference Board's Consumer Confidence Index for December, and the FHFA Housing Price Index for October:

  • Initial claims for the week ending December 22 decreased by 1,000 to 216,000 ( consensus 225,000) while continuing claims for the week ending December 15 decreased by 4,000 to 1.701 million.
    • The key takeaway from the report is that initial claims continue to print at low levels that don't suggest any meaningful softening has occurred in the labor market despite the concerns about a slower growth outlook.
  • The Conference Board's Consumer Confidence Index decreased to 128.1 in December ( consensus 133.7) from a revised 136.4 (from 135.7) in November.
    • The key takeaway from the report is that consecutive declines in the Expectations Index point to a growing belief that the pace of economic growth will decelerate in the first half of 2019.
  • The FHFA Housing Price Index increased 0.3%, up from an unrevised September increase of 0.2%.

Looking ahead, investors will receive Pending Home Sales for November on Friday.

  • Nasdaq Composite -4.7% YTD
  • Dow Jones Industrial Average -6.4% YTD
  • S&P 500 -6.9% YTD
  • Russell 2000 -13.3% YTD
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