Day Traders Diary

3/28/17

 Last Tuesday, the S&P 500 posted its worst day of 2017 in a performance that some believed to be the end of the stock market's post-election party. However, the cash market held its ground in the days that followed and the S&P 500 resisted yesterday's intraday dip below its 50-day moving average (2333), giving investors renewed confidence that there still may be some room to run. That hypothesis was validated today as the S&P 500 advanced 0.7%, benefiting from a steady rally throughout the day. The Dow and the Nasdaq also settled with solid gains, adding 0.7% and 0.6%, respectively.

The financial sector (+1.4%) took the reigns in today's session, recouping a sizable portion of last Tuesday's plunge. The group has come to symbolize the post-election rally after leading the charge with a 26.0% gain from November 8 to January 3. Financials' cyclical peers followed suit with the industrials (+1.1%) materials (+1.1%), and energy (+1.3%) sectors outpacing the broader market.

To be fair, the energy sector's performance was more of a response to crude oil's advance rather than the financial sector's leadership. The energy component settled 1.4% higher at $48.37/bbl after an armed group of individuals shut down pipelines in Libya due to a wage dispute.

On the countercyclical side, the health care sector (+0.1%) struggled after House Speaker Paul Ryan and Majority Leader Kevin McCarthy expressed the belief that it's still not too late to repeal and replace the Affordable Care Act. White House Press Secretary Sean Spicer followed up those comments by saying that discussions on health care reform are taking place, but there is no active planning at the present time.

Within the health care space, biotech stocks were hit the hardest as President Trump's promise to reduce drug prices resurfaced alongside health care reform. The iShares Nasdaq Biotechnology ETF (IBB 292.01, -1.13) settled lower by 0.4%.

The remaining defensive sectors also underperformed, with the rate-sensitive utilities group (+0.1%) showing relative weakness after selling pressure in the Treasury market left yields modestly higher; the benchmark 10-yr yield finished four basis points higher at 2.42%.

In addition to Treasury yields, the U.S. Dollar Index (99.53, +0.50) also closed in the green, rising 0.5%, after Fed Vice Chair Stanley Fischer stated that he believes a forecast of two more rate hikes in 2017 is appropriate.

Investors received several economic reports on Tuesday, including March Consumer Confidence, February Advance International Trade in Goods, and January S&P Case-Shiller Home Price Index:

The consumer confidence reading for March rose to 125.6 from the prior month's revised reading of 116.1 (from 114.8). The Briefing.com consensus expected the survey to hit 113.3.

The key takeaway from this report is that consumers were emboldened by a positive view of current business and labor market conditions. There was an improvement in the short-term outlook for business, jobs, and personal income prospects, and more upside is expected on these fronts. Keep in mind that this survey was taken before the failure of health care reform.

The Advance report for International Trade in Goods for February showed a deficit of $64.8 billion (Briefing.com consensus -$66.1 billion), up from a revised deficit of $68.8 billion for January (from $69.2 billion). The Advance report for February Wholesale Inventories increased 0.4% (Briefing.com consensus 0.2%). The prior month's reading was revised to -0.2% from -0.1%.

The January Case-Shiller 20-city Index hit 5.7% to follow last month's revised 5.5% increase (from 5.6%). The Briefing.com consensus expected a reading of 5.6%.

On Wednesday, investors will receive the weekly MBA Mortgage Applications Index at 7:00 ET and February Pending Home Sales (Briefing.com consensus 2.4%) at 10:00 ET.

Nasdaq Composite +9.1% YTD

S&P 500 +5.4% YTD

Dow Jones Industrial Average +4.8% YTD

Russell 2000 +0.7% YTD