Day Traders Diary

6/1/17

The stock market opened the week on a positive note with the top-weighted technology (+0.9%) and financials (+0.5%) sectors pacing the advance. The S&P 500 (+0.2%) traded within a ten-point range, settling near its opening level after challenging its all-time closing high (2,395.96). Meanwhile, the Nasdaq (+0.7%) outperformed, ending the session convincingly higher, while the Dow (-0.1%) posted a small loss.

Investors received several headlines from the nation's capital on Monday. The first was news of an agreement between congressional leaders that, if approved, will keep the government funded through September. The deal, which puts fears of a government shutdown on hold, sent the S&P 500 into positive territory at the opening bell.

However, the next headline, which was a statement from President Trump, resulted in a small sell-off in the early-afternoon session. Mr. Trump said that he may favor breaking up the nation's biggest banks, which briefly sent the financial sector lower. However, stocks recovered shortly thereafter as the headline provided little new information; President Trump has mentioned reinstating Glass-Steagall prior to today's announcement.

Lastly, Mr. Trump said that he was open to raising the federal tax on gasoline in order to finance his infrastructure package. This news had a minimal impact on today's activities, however, it's worth noting as the Trump administration will likely continue playing with different tax ideas to supplement the president's tax reform package.

In the end, news from the nation's capital came and went, but the real driver behind today's victory was large-cap names like Apple (AAPL 146.60, +2.95), Amazon (AMZN 948.43, +23.44), Microsoft (MSFT 69.41, +0.95), Alphabet (GOOGL 932.82, +8.30), and Facebook (FB 152.46, +2.21). The five names settled with gains between 0.9% (Alphabet) and 2.5% (Amazon) and carried the top-weighted technology sector to the top of the day's leaderboard.

The heavily-weighted financial sector also played a big part in today's positive performance, pairing with the technology group to carry the broader market. The two sectors that comprise around 35.0% of the broader market watered-down the effects of bearish countercyclical groups like consumer staples (-0.5%), utilities (-0.7%), and telecom services (-0.8%).

Crude oil weighed on the energy sector (-0.2%), finishing its trading day 0.9% lower at $48.86/bbl. However, outside of real estate (+0.6%), the remaining sectors--industrials, consumer discretionary, materials, and health care--finished relatively flat, settling within 0.3% of their unchanged marks.

In the bond market, Treasuries settled lower across the board, however, selling pressure was not distributed equally across the yield curve. The 10-yr yield (2.32%) finished four basis points higher while the 2-yr yield (1.29%) added only two basis points.

It's worth noting that today's trading volume was relatively light. Market were closed across Europe and most of Asia in observance of Labor Day. 874.2 million shares changed hands at the NYSE floor (50-day simple moving average: 1.09 billion).

On the data front, investors received several economic reports on Monday, including March Personal Income and Personal Spending, the April ISM Index, and March Construction Spending:

March personal income rose 0.2%, which is below the Briefing.com consensus of 0.3%. Meanwhile, March personal spending was unchanged (Briefing.com consensus 0.1%). February Personal Income was revised to 0.3% (from 0.4%) while February Personal Spending was revised to 0.0% (from 0.1%). Separately, PCE prices for March declined by 0.2% (Briefing.com consensus N/A) while Core PCE prices ticked down by 0.1% (Briefing.com consensus 0.0%).

The key takeaway from the report is that it showed a deceleration in both the PCE Price Index and the core PCE Price Index year-over-year. That will temper concerns about the Fed being behind the curve in fighting inflation and it will quiet concerns about the Fed needing to be more aggressive in tightening monetary policy than is currently projected.

The ISM Index for April declined to 54.8 from an unrevised reading of 57.2 in March while the Briefing.com consensus expected a downtick to 56.5.

The key takeaway from the report is that the manufacturing sector registered growth for the eighth consecutive month, albeit at a slower pace from recent months which featured the highest reading for the index in February (57.7) since August 2014.

The Construction Spending report for March showed a decrease of 0.2% while the Briefing.com consensus expected an increase of 0.4%. The prior month's reading was revised to 1.8% from 0.8%.

The key takeaway from the report is that the headline disappointment for March was more than offset by the upward revision to February, meaning the March miss wasn't a true miss.

Tomorrow, investors will not receive any economic reports, but April auto and truck sales will be released throughout the day.

Nasdaq Composite +13.2% YTD

S&P 500 +6.7% YTD

Dow Jones Industrial Average +5.8% YTD

Russell 2000 +3.7% YTD