Day Traders Diary

4/25/17

Bullish catalysts were ripe for the picking on Tuesday as buyers advanced the S&P 500 (+0.6%) for the second time in a row, increasing the benchmark index's week-to-date gain to 1.7%. The Nasdaq (+0.7%) settled a tick higher than the S&P 500 while the Dow blew its peers away, adding 1.1%.

The positive sentiment surrounding the first round the French presidential election continued to linger on Tuesday, but investors turned their attention back to the home front where they were met with a slew of earnings reports. The results were largely favorable with Dow components like Caterpillar (CAT 10442, +7.61), McDonald's (MCD 141.70, +7.47), and DuPont (DD 82.21, +2.84) giving the price-weighted average a clear advantage. CAT shares spiked 7.9% in reaction to a big, upside earnings surprise, better than expected revenues, and upbeat guidance. MCD and DD also settled solidly higher, adding 5.6% and 3.6%, respectively, after beating top and bottom line estimates.

However, not all Dow components rallied around their latest earnings reports. 3M (MMM 195.13, +0.90) added only 0.5% despite beating top and bottom line estimates and issuing upbeat guidance. Coca-Cola (KO 43.11, -0.17) finished lower by 0.4% after a miss on earnings outweighed better than expected revenues.

Sector standings were largely determined by the day's earnings. For instance, MCD's positive performance helped the consumer discretionary sector (+0.8%) outperform while DuPont influenced the materials sector (+1.6%) to the top of the day's leaderboard. In the industrial space (+0.5%), Caterpillar did all it could to give the sector an edge, but Lockheed Martin's (LMT 270.02, -6.19) worse than expected revenues and disappointing guidance weighed, leaving the industrial group just behind the benchmark index.

Biogen (BIIB 286.89, +10.03) rallied the biotech industry, jumping 3.6%, after the company beat top and bottom line estimates. The iShares Nasdaq Biotechnology ETF (IBB 295.55, +3.81) settled higher by 1.3%, however, the health care sector (+0.5%) was held back by big losses from Eli Lilly (LLY 81.20, -2.22) and Express Scripts (ESRX 60.01, -7.24). ESRX plunged 10.8% after disclosing that its contract with Anthem (ANTM 172.46, +4.05) is unlikely to be extended.

With the uncertainty regarding the French presidential election largely in the rear-view mirror, the financial sector (+0.8%) benefited from some belated buying as investors tried to make up for last week's muted response to a host of better than expected earnings reports from top financial components.

Summarizing the sector standings, nine of eleven sectors finished in positive territory. The materials group closed at the top of the standings by a wide margin while the utilities (-0.1%) and telecom services (-0.3%) spaces finished in negative territory at the bottom. The real estate (+0.2%) and consumer staples (+0.3%) sectors underperformed, and the remaining sectors--financials, consumer discretionary, industrials, energy, technology, and health care--settled with gains between 0.5% and 0.8%.

However, it is important to note that while a swath of earnings was the most obvious catalyst behind today's advance, politics certainly played a supporting role. Namely, investors cheered the renewed push for tax reform (with, or without, health care reform), a sense that Congress will avoid a government shutdown this week, and China's diplomatic emphasis on quieting tensions over North Korea.

The resulting risk-on sentiment was felt throughout the bond market with Treasuries closing lower across the board. The 10-yr yield settled six basis points higher at 2.33%, which is notable given the recent resistance the benchmark yield has encountered around the 2.30% mark.

On the data front, investors received several economic reports on Tuesday, including March New Home Sales, April Consumer Confidence, the February Case-Shiller Home Price Index, and the February FHFA Housing Price Index:

New Home Sales in March hit an annualized rate of 621,000, which was above the revised February rate of 587,000 (from 592,000), and more than the 590,000 that was expected by the Briefing.com consensus.

The key takeaway from the report is that demand for new homes was strong, notwithstanding higher price points from the same period a year ago.

The consumer confidence reading for April fell to 120.3 from the prior month's revised reading of 124.9 (from 125.6). The Briefing.com consensus expected the survey to hit 122.3.

The key takeaway from the report is that confidence remains at high levels and indicative of an expectation that the economy will continue to expand in the months ahead.

The February Case-Shiller 20-city Index hit 5.9% to follow last month's unrevised 5.7% increase. The Briefing.com consensus expected a reading of 5.8%.

The FHFA Housing Price Index for February increased 0.8%, which followed a revised uptick of 0.2% (from 0.0%) in January.

Tomorrow, investors will receive only one economic report--the weekly MBA Mortgage Applications Index--at 7:00 ET.

Nasdaq Composite +11.9% YTD

S&P 500 +6.7% YTD

Dow Jones Industrial Average +6.2% YTD

Russell 2000 +4.0% YTD