Day Traders Diary

4/12/17

 The bears edged the bulls from the jump on Wednesday with geopolitics fueling the cautious sentiment. The S&P 500 (-0.4%) finished below its 50-day moving average (2351), which has been a mainstay of support since the election. The Dow (-0.3%) and the Nasdaq (-0.5%) settled on opposite sides of the benchmark index while the Russell 2000 (-1.3%) underperformed.

Secretary of State Rex Tillerson's visit to Moscow frequented the day's headlines. Mr. Tillerson did end up meeting with Russian President Vladimir Putin despite earlier reports that the Mr. Putin would not meet with the U.S. diplomat. However, the conversations were rough with Mr. Tillerson saying that U.S.-Russia relations are "at a low point."

Back in the U.S., President Trump made headlines on a couple of occasions. First, Mr. Trump made it clear that health care reform will once again take priority over tax reform. Second, the president reiterated his belief that the U.S. dollar is too strong, and, in the same breath, said that he was undecided on re-nominating Fed Chair Janet Yellen. Based on his comments, it appears that Mr. Trump is seeking Fed officials that will keep the U.S. dollar, and interest rates, as low as possible.

The U.S. Dollar Index (100.12, -0.50) tumbled from its flat line in the wake of President Trump's comments, finishing the day with a loss of 0.5%. Conversely, U.S. Treasuries moved higher in electronic trade with the benchmark 10-yr yield (2.26%) losing four basis points to drop below the key technical support level of 2.30%.

However, despite the notable headlines, equities watched the news pass by, sticking to their modest losses. Sector standings reflected a cautious sentiment with countercyclical groups outperforming their cyclical peers, but the broader market's loss remained modest throughout the session.

The industrials (-1.3%), financials (-0.9%), and materials (-1.2%) sectors finished at the bottom of the day's leaderboard, while the consumer staples (+0.5%), utilities (+0.7%), and telecom services (+0.6%) groups settled at the top.

Following today's loss, the financial sector now trades in negative territory for the year (-0.3%). The space will be looking to get its 2017 campaign back on track with earnings reports from JPMorgan Chase (JPM 85.40, -0.33), Citigroup (C 58.51, -0.52), and Wells Fargo (WFC 53.12, -1.04) tomorrow morning.

Through it all, the best summary of today's action may be the increase in the CBOE Volatility Index (VIX 15.96, +0.89). The VIX Index sits at its highest level since the presidential election, indicating that investors need results rather than words to keep moving stocks forward.

On the data front, investors received a batch of economic reports on Tuesday, including March Import/Export Prices, March Treasury Budget, and the weekly MBA Mortgage Applications Index:

Import prices excluding oil rose 0.2% in March after adding 0.4% in February (revised from 0.3%). Export prices excluding agriculture increased 0.2% in March after rising 0.3% in February.

The monthly readings for March might have been mixed, yet the key takeaway from the report is that the year-over-year readings speak to a trend of rising inflation for core import and export prices.

The Treasury Budget for March showed a deficit of $176.2 billion versus a deficit of $108.0 billion for March 2016. The Treasury Budget data is not seasonally adjusted, so the March deficit cannot be compared to the $192.0 billion deficit registered in February.

The weekly MBA Mortgage Applications Index, which was released earlier this morning, increased 1.5% to follow last week's 1.6% decline. In addition, investors will receive the March Treasury Budget this afternoon at 14:00 ET.

Tomorrow, investors will see a slew of economic data, including March PPI (Briefing.com consensus 0.0%) and Initial Claims (Briefing.com consensus 251,000) at 8:30 ET and the preliminary reading of the University of Michigan Consumer Sentiment Survey (Briefing.com consensus 96.3) at 10:00 ET.

Nasdaq Composite +8.4% YTD

S&P 500 +4.7% YTD

Dow Jones Industrial Average +4.2% YTD

Russell 2000 +0.2% YTD