Day Traders Diary

4/4/17

Uncertainty put a force field around the stock market on Tuesday, deterring the bulls and the bears from exerting much influence on the major averages. The Dow (+0.2%) and the Nasdaq (+0.2%) settled roughly in line with the S&P 500 (+0.1%), which held to a ten-point range throughout the day's "action".

Tuesday's uneasiness was based in a number of factors, including the upcoming meeting between President Trump and Chinese President Xi Jinping, Fed officials shifting the focus from rate hikes to the central bank's balance sheet, the resurgence of health care reform (and what it will mean for tax reform), discrepancy between 'hard' and 'soft' economic data, the French presidential election, and heightened tensions with North Korea, among others.

With those unanswered questions looming in the background, sector movement was subdued; nine of eleven settled within 0.3% of their respective flat lines.

The energy sector (+0.7%) ventured a little ways from its unchanged mark, lured into green territory by crude oil's positive performance. The energy component increased 1.5% to finish pit trade at $50.99/bbl, which marks the commodity's highest level in nearly a month.

Like energy, the industrials (+0.2%), consumer staples (+0.3%), and technology (+0.2%) sectors finished ahead of the broader market. Caterpillar (CAT 94.13, +1.86) was the industrial group's top performer, climbing 2.0%, after the company's stock was added to the 'Conviction Buy List' at Goldman. As for technology, Apple (AAPL 144.77, +1.07) and Microsoft (MSFT 65.73, +0.18) propped up largest sector by weight with respective gains of 0.7% and 0.3%.

On the downside, the financials (-0.2%) and consumer discretionary (-0.1%) spaces settled below their flat lines with the latter suffering amid weakness in retailers after it was reported that the White House is considering a value-added tax. The SPDR S&P Retail ETF (XRT 41.22, -0.38) closed lower by 0.9%.

In the Treasury market, U.S. sovereign debt finished Tuesday with a modest loss. The benchmark 10-yr yield closed three basis points higher at 2.35%.

On the data front, investors received February Trade Balance and February Factory Orders:

The February trade balance showed a deficit of $43.6 billion while the Briefing.com consensus expected the deficit to hit $44.7 billion. The previous month's deficit was revised to $48.2 billion from $48.5 billion.

The narrowing deficit should help some with first quarter GDP forecasts, yet the key takeaway from this report is that imports were down as much as they were in February, which speaks to some softening demand from U.S. consumers.

The Factory Orders Report for February showed an increase of 1.0% while the Briefing.com consensus expected an increase of 0.9%. The January reading was revised to 1.5% (from 1.2%).

The key takeaway from the report is that overall business spending was soft in February, evidenced by the 0.1% decline in nondefense capital goods orders excluding aircraft (the proxy for business spending).

Tomorrow, investors will see a slew of economic reports, including the weekly MBA Mortgage Index at 7:00 ET, March ADP Employment Change (Briefing.com consensus 175,000) at 8:15 ET, March ISM Services (Briefing.com consensus 57.0) at 10:00 ET, and the FOMC Minutes from the March 14-15 meeting at 14:00 ET.

Nasdaq Composite +9.6% YTD

S&P 500 +5.4% YTD

Dow Jones Industrial Average +4.7% YTD

Russell 2000 +0.7% YTD