Day Traders Diary

5/16/17

Top-tech names like Microsoft (MSFT 69.41, +1.37), Amazon (AMZN 966.07, +8.10), and NVIDIA (NVDA 136.81, +2.50) boosted the Nasdaq (+0.3%) to another record high on Tuesday while the Dow (unch) and the S&P 500 (-0.1%) settled just a tick below their unchanged marks. Trading activity was pretty flat throughout the session, as the S&P 500 drifted within a ten-point range.

Only the top-weighted technology (+0.5%) and financials (+0.2%) sectors ended the day in positive territory. As mentioned above, large-cap tech names underpinned the tech group. In addition, chipmakers showed broad strength, pushing the PHLX Semiconductor Index higher by 1.5%. With today's advance, the SOX index is up 7.1% so far in May. Meanwhile, Citigroup (C 62.49, +1.07) carried the financial sector, adding 1.7%.

On the flip side, the health care sector (-0.4%) struggled from the opening bell as some of its most influential components weighed; Pfizer (PFE 32.60, -0.52), UnitedHealth (UNH 168.12, -3.41), and Bristol-Myers (BMY 54.39, -0.71) ended with losses between 1.3% and 2.0%. PFE shares were downgraded to 'Sell' from 'Neutral' at Citigroup on Tuesday morning. However, strength within the biotech industry helped cap the sector's loss. The iShares Nasdaq Biotechnology ETF (IBB 295.30, +1.18) added 0.4%.

The energy sector (-0.4%) also underperformed as crude oil dropped 0.5% to $48.64/bbl following yesterday's 2.1% rally, and ahead of this afternoon's API inventory report, which will be released at 16:30 ET. Meanwhile, retailers weighed on the consumer discretionary space (-0.3%) following the latest batch of earnings reports.

TJX (TJX 73.76, -3.14) and Dick's Sporting Goods (DKS 41.04, -6.53) lost 4.1% and 13.7%, respectively, in reaction to their quarterly results. TJX missed top-line estimates and issued disappointing earnings guidance for the second quarter while DKS reported weak comparable store sales. However, the results weren't all bad with Home Depot (HD 158.26, +0.93) adding 0.6% on better than expected earnings and a 5.5% increase in comparable store sales. The SPDR S&P Retail ETF (XRT 41.74, -0.33) ended lower for the fourth consecutive time, losing 0.8%.

The XRT has dropped 5.4% since last Thursday when Macy's (M 22.82, -0.39) kicked off what has largely been a poor earnings season for retailers thus far. However, there are still a couple of opportunities for redemption for the retail industry with Target (TGT 54.53, -0.82) stepping up to the plate tomorrow morning and Wal-Mart (WMT 75.11, -1.18) delivering its quarterly results on Thursday.

In the bond market, U.S. Treasuries settled with modest gains across the board, leaving the benchmark 10-yr yield two basis points lower at 2.32%. Conversely, the U.S. Dollar Index (98.04, -0.77) slipped to its lowest level since the U.S. presidential election on November 8. The greenback lost 1.0% against the euro (1.1088) after eurozone GDP increased an in-line 0.5% quarter-over-quarter.

On the data front, investors received April Housing Starts and April Industrial Production on Tuesday:

Housing starts decreased to a seasonally adjusted annualized rate of 1.172 million units in April, down from a revised 1.203 million units in March (from 1.215 million). The Briefing.com consensus expected starts to increase to 1.255 million units. Building permits decreased to a seasonally adjusted 1.229 million in April from an unrevised 1.260 million for March. The Briefing.com consensus expected a reading of 1.270 million.

The key takeaway from the report stems from the drop in single-family permits, which suggests there will be continued supply shortages and affordability constraints in the new home market.

Industrial Production increased 1.0% in April (Briefing.com consensus 0.3%) while Capacity Utilization rose to 76.7% (Briefing.com consensus 76.2%) from an unrevised reading of 76.1% in March. The Industrial Production reading for March was revised to 0.4% from 0.5%.

The key takeaway from the report is that total industrial production saw its largest gain since February 2014, bolstered by a healthy 1.0% increase in manufacturing output, which was also the largest gain since February 2014.

Tomorrow, investors will receive the weekly MBA Mortgage Applications Index at 7:00 ET.

Nasdaq Composite +14.6% YTD

S&P 500 +7.2% YTD

Dow Jones Industrial Average +6.2% YTD

Russell 2000 +2.8% YTD