Day Traders Diary

5/24/17

After four consecutive wins for the equity market, equity futures point to a muted open for Wednesday's session. The S&P 500 futures trade one point above fair value.

Moody's downgraded China's credit rating to A1 from Aa3 and changed its outlook to 'Stable' from 'Negative.' This was the first downgrade for China since 1989 and was described as "absolutely groundless" by Chinese officials. China's Shanghai Composite climbed into the close to eke out a small victory (+0.1%).

Crude oil trades relatively flat at $51.47/bbl as investors eye tomorrow's OPEC/non-OPEC production meeting. Many market participants expect the top oil producers to extend (and possibly deepen) the current supply cut agreement.

It's also worth noting that the American Petroleum Institute (API) reported a draw of 1.5 million barrels for the week ended May 19. The Energy Information Administration (EIA) will deliver its weekly inventory report today at 10:30 ET.

U.S. Treasuries and the U.S. Dollar Index (97.27, -0.01) both hover near their unchanged marks this morning with the benchmark 10-yr yield unchanged at 2.28%.

On the data front, the weekly MBA Mortgage Applications Index increased 4.4% to follow last week's 4.1% decrease.

In addition, investors will receive the 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.

In U.S. corporate news:

Lowe's (LOW 79.75, -2.59): -3.2% after missing bottom-line estimates.

Tiffany & Co. (TIF 88.77, -4.37): -4.7% after worse than expected revenues overshadowed better than expected earnings.

Advance Auto Parts (AAP 135.00, -5.66): -4.0% after missing top and bottom line estimates.

Intuit (INTU 141.03, +11.88): +9.2% after reporting better than expected earnings/revenues and issuing upbeat guidance.

Reviewing overnight developments:

Equity indices in the Asia-Pacific region ended the midweek session on a mostly higher note, but gains were limited. Japan's Nikkei +0.7%, Hong Kong's Hang Seng +0.1%, China's Shanghai Composite +0.1%, India's Sensex -0.2%.

In economic data:

Japan's Leading Index held at 105.5, as expected. Reuters Tankan Index slipped to 24 from 26.

Australia's Q1 Construction Work Done -0.7% quarter-over-quarter (expected -0.2%; last 0.6%)

New Zealand's April trade deficit AUD3.48 billion year-over-year (expected deficit of AUD3.79 billion; last deficit of AUD3.71 billion). April Imports AUD4.17 billion (expected AUD4.10 billion; last AUD4.33 billion) and April Exports AUD4.75 billion (expected AUD4.40 billion; last AUD4.61 billion)

In news:

Moody's downgraded China's credit rating to A1 from Aa3 and changed its outlook to 'Stable' from 'Negative.' This was the first downgrade for China since 1989 and was described as "absolutely groundless" by Chinese officials.

Japan's Prime Minister Shinzo Abe is expected to hold talks with U.S. President Donald Trump at this weekend's G7 summit in Taormina.

The Reserve Bank of New Zealand may be prompted to raise rates after Fonterra increased its milk price forecast for fiscal year 2017.

Major European indices trade in mixed fashion. UK's FTSE +0.3%, France's CAC -0.2%, Germany's DAX -0.2%.

In economic data:

Germany's June GfK Consumer Climate 10.4 (expected 10.2; last 10.2)

Spain's PPI +5.9% year-over-year (last 6.0%)

In news:

Handelsblatt reported yesterday that the International Monetary Fund has shown increased willingness to join the Greek bailout just days after failing to agree to terms.

U.S. President Donald Trump visited the Holy See and met with Pope Francis today. President Trump is expected to meet with Italian leaders before flying to Brussels for tomorrow's special NATO meeting.

British Prime Minister Theresa May said the country's terror threat level will be temporarily raised to 'critical' from 'severe' following Monday's bombing in Manchester.