Day Traders Diary

5/23/17

Equities finished higher for the fourth day in a row on Tuesday. The benchmark index challenged the 2,400 level, which is the mark it hit just before last Wednesday's dive, but couldn't surpass the milestone. The major averages settled near the middle the day's trading range with the S&P 500 and the Dow adding 0.2% apiece while the Nasdaq (+0.1%) settled just a tick below its peers.

The equity market benefited, yet again, from a continuation of the 'buy-the-dip' trade that kicked in following last Wednesday's 1.8% slide, which marked the largest one-day decline in eight months. Today, the upbeat sentiment resulted in a dip in both the CBOE Volatility Index (VIX 10.79, -0.14, -1.3%) and the bond market, both of which settled at fresh one-week lows. The benchmark 10-yr yield climbed three basis points to 2.29%, helping the U.S. Dollar Index (97.30, +0.42) add 0.4%.

In the stock market, ten of eleven sectors finished in positive territory with the financial group (+0.8%) leading the advance. Financials spent the opening hour of Tuesday's session underwater, but quickly regrouped to head two rallies (one in the morning and one in the afternoon). However, both efforts faded when the benchmark index hit the 2,400 mark. Still, the financial group settled, unchallenged, at the top of the day's leaderboard.

Like financials, the health care sector (+0.4%) outperformed. The sector relied on broad strength to mitigate Alexion Pharmaceuticals' (ALXN 104.64, -10.78) 9.3% plunge. The company faced heavy selling pressure after announcing that its CFO will resign from his position at the end of August. The utilities sector (+0.2%) finished just a tick ahead of the benchmark index after some afternoon profit taking erased the sector's solid morning performance.

On the downside, the consumer discretionary sector (-0.4%) settled at the bottom of the day's leaderboard. Retailers weighed on the sector, evidenced by the 1.7% decrease in the SPDR S&P Retail ETF (XRT 40.55, -0.76), after AutoZone (AZO 581.40, -78.09) and DSW (DSW 16.21, -1.44) missed earnings expectations. AZO also missed top-line estimates while DSW reported a 3.0% decrease in comparable store sales. The two companies settled lower by 11.8% and 8.2%, respectively.

Meanwhile, in the top-weighted technology sector (+0.1%), chipmakers weighed, pushing the PHLX Semiconductor Index lower by 0.4%. Xilinx (XLNX 63.97, -3.55) was hit the hardest, losing 5.3%, after XLNX shares were downgraded to 'Market Perform' from 'Outperform' at Wells Fargo. Mega-cap tech names like Apple (AAPL 153.80, -0.19) and Facebook (FB 148.07, -0.17) also lagged, losing 0.1% apiece.

The remaining sectors--industrials (+0.2%), energy (+0.2%), materials (+0.2%), consumer staples (+0.1%), telecom services (+0.1%), and real estate (+0.1%)--finished roughly in line with the broader market. However, the energy sector's performance is worth pointing out in light of the White House's proposed budget, which calls for selling half of the United States' Strategic Petroleum Reserve (SPR). Initially, WTI crude faced some overnight selling pressure. However, the commodity was able to recover, ending the session 0.7% higher at $51.48/bbl.

On the data front, investors received only one economic report--April New Home Sales--on Tuesday:

New Home Sales in April hit an annualized rate of 569,000, which was below the revised March rate of 642,000 (from 621,000), and less than the 605,000 that was expected by the Briefing.com consensus.

The key takeaway from the report is that upward revisions to prior months more than made up for the shortfall in April relative to the consensus estimate, which is to say the April report is not as disappointing as it appears to be at first blush.

Tomorrow, investors will receive several economic reports, including the weekly MBA Mortgage Applications Index at 7:00 ET, March FHFA Housing Price Index at 9:00 ET, April Existing Home Sales (Briefing.com consensus 5.65 million) at 10:00 ET, and the FOMC minutes for the May 2-3 meeting at 14:00 ET.

Nasdaq Composite +14.0% YTD

S&P 500 +7.1% YTD

Dow Jones Industrial Average +6.0% YTD

Russell 2000 +1.8% YTD