Day Traders Diary

3/6/17

A morning sell-off was met with a slight uptick in buying interest on Monday afternoon, leaving the major averages with modest losses to start the new week on lower-than-average trading volume. The Dow finished lower by 0.2% while the S&P 500 (-0.3%) and Nasdaq (-0.4%) performed slightly worse. Small-caps were hit the heaviest with the Russell 2000 closing lower by 0.7%.

Given the pace and scope of gains this year, and really since President Trump's election on November 8 -- a period in which the S&P 500 has gained over 11.0% -- it should come as little surprise to see the stock market succumb to some profit-taking interest.

There were some news headlines over the weekend that may have contributed to the profit taking from what many pundits are describing as a market that is overextended on a short-term basis.

The most notable of these headlines was North Korea's most recent act of defiance in which Pyongyang launched four ballistic missiles into the Sea of Japan, marking the third time since August that North Korean missiles have fallen in Japan's exclusive economic zone.

Other notable news included allegations from President Trump that former President Obama ordered a wiretap of his Trump Tower offices prior to the presidential election and an announcement from Deutsche Bank (DB) that the company will raise $8.5 billion of capital through the issuance of stock.

These headlines, though, appeared to serve more as convenient excuses to do some selling than anything else considering the stock market did make a rebound effort intraday and the CBOE Volatility Index increased less than 1.0%, hinting at some limited hedging activity among today's participants.

Ten of eleven sectors finished Monday's session in the red. The energy sector (+0.3%) was the lone winner. The top spot on the leaderboard has been an elusive one for the energy sector, which remains in last place in the 2017 sector standings with a year-to-date loss of 5.2%.

Crude oil didn't aid the energy sector's uptick, finishing Monday's session with a loss of 0.2% at $53.22/bbl. The commodity was pressured somewhat by a strengthening U.S. dollar, which was reflected in the 0.3% uptick for the U.S. Dollar Index (101.69, +0.34).

The top-weighted technology sector (-0.2%) saw some slight outperformance versus the broader market, but still ended the day lower.  The semiconductor stocks helped keep the sector's losses in check, as they rebounded from early losses to help the PHLX Semiconductor Index eke out a small gain for the session.

The financial sector (-0.6%) led the stock market's retreat in the morning session, but received a jumpstart in the afternoon to climb past the materials sector (-0.7%) at the bottom of the leaderboard.

News on the corporate front was limited, but it is worth noting that airlines suffered after Delta Air Lines (DAL 48.85, -1.28) cut its first quarter guidance in light of more moderate than expected unit revenues in February. Despite the airlines' losses, the industrial sector (-0.3%) finished in line with the benchmark index.

Losses in the remaining sectors -- consumer discretionary, health care, consumer staples, utilities, telecom services, and real estate-- were modest, between 0.2% and 0.4%.

U.S. Treasuries finished slightly lower as fixed-income markets were still digesting last week's aggressive campaign by Fed officials to prepare markets for the possibility of a March 15 rate hike. The benchmark 10-yr yield closed Monday one basis point higher at 2.49%.

Monday's lone economic report was January Factory Orders:

The Factory Orders Report for January showed an increase of 1.2% while the Briefing.com consensus expected a increase of 1.0%. The December reading was left unrevised at 1.3%.

The key takeaway from the report is that it should contribute to some slight upward revisions to economists' first quarter GDP estimates since shipments of nondefense capital goods excluding aircraft were not down as much as the advanced report for durable goods indicated.

Tomorrow's data will include January Trade Balance (Briefing.com consensus -$48.5 billion) at 8:30 ET and January Consumer Credit (Briefing.com consensus $17.0 billion) at 15:00 ET.

Nasdaq Composite +8.7% YTD

S&P 500 +6.1% YTD

Dow Jones Industrial Average +6.0% YTD

Russell 2000 +2.0% YTD