Day Traders Diary

4/3/17

 An afternoon rally erased much of the stock market's morning loss, but it just wasn't enough to bring the major averages all the way back to their unchanged marks. The S&P 500 opened the second quarter of 2017 with a modest loss of 0.2% while the Nasdaq and the Dow settled lower by 0.3% and 0.1%, respectively. Meanwhile, the small-cap Russell 2000 (-1.2%) underperformed.

Stocks held close to their flat lines at the opening bell, but it didn't take long for the financial sector (-0.3%) to disrupt the equilibrium. Action within the Treasury market prompted the sector's retreat as unequally distributed buying left longer-dated issues notably higher than their shorter-dated peers. However, the yield curve balanced out a bit in the afternoon, allowing the financial group, and the broader market, to come up from its worst level of the day. The 10-yr yield (2.35%) finished four basis points lower while the 2-yr yield (1.24%) gave up only two basis points.

The remaining cyclical groups settled with modest losses. The consumer discretionary space (-0.5%) closed at the bottom of the day's leaderboard following the largely disappointing auto sales figures for the month of March. Large-cap names like Ford Motor (F 11.44, -0.20), General Motors (GM 34.17, -1.19), Fiat Chrysler (FCAU 10.41, -0.52), Toyota Motor (TM 108.52, -0.10), and Honda Motor (HMC 30.13, -0.13) finished with losses between 0.1% (Toyota) and 4.8% (Fiat Chrysler). Used-car retailer CarMax (KMX 56.67, -2.55) also struggled, dropping 4.3%, to settle as one of the worst-performing SPDR S&P Retail ETF (XRT 41.60, -0.64) components. The XRT finished lower by 1.5%.

However, the auto sales results weren't all bad as electric automaker Tesla (TSLA 298.52, +20.22) jumped 7.3% after reporting a 69.0% year-over-year increase in first quarter deliveries. TSLA shares settled at a fresh all-time high as the company surpassed Ford in market capitalization to become the second biggest automaker in the U.S.

On the countercyclical side, defensive groups generally finished ahead of the broader market as investors gave preference to the less-risky equities. The health care sector (+0.1%) finished with the telecom services space (+0.4%) atop the day's leaderboard as managed health care names like UnitedHealth (UNH 165.59, +1.58), Aetna (AET 128.74, +1.19), and Anthem (ANTM 166.49, +1.11) provided a pocket of strength.

On the data front, investors received the March ISM Index and February Construction Spending:

The ISM Index for March declined to 57.2 from an unrevised reading of 57.7 in February while the Briefing.com consensus expected a downtick to 57.0.

The key takeaway from the report is that all 18 industries reported growth in new orders for the month of March.

The Construction Spending report for February showed an increase of 0.8% while the Briefing.com consensus expected an increase of 1.0%. The prior month's reading was revised to -0.4% from -1.0%.

The key takeaway from the report is that increases were seen in both private construction spending (+0.8%) and public construction spending (+0.6%).

Tomorrow, February Trade Balance (Briefing.com consensus -$44.7 billion) and February Factory Orders (Briefing.com consensus 0.9%) will cross the wires at 8:30 ET and 10:00 ET, respectively.

Nasdaq Composite +9.5% YTD

S&P 500 +5.4% YTD

Dow Jones Industrial Average +4.5% YTD

Russell 2000 +0.9% YTD