Day Traders Diary

5/31/17

The S&P 500 (-0.1%) registered its second-consecutive decline on Wednesday as the financial sector (-0.8%) weighed on the broader market. However, a late-afternoon rally left the major averages at the upper end of the day's trading range. The Nasdaq (-0.1%) and the Dow (-0.1%) finished in line with the benchmark index.

Financials were under pressure from the jump after several industry leaders offered cautious commentary on market trends and conditions at the Deutsche Bank Financial Services Conference. Some of the most notable concerns surrounding the industry include slowing loan growth, rising delinquencies for sub-prime auto loans, and a flattening of the yield curve. However, the financial sector doesn't deserve all of the blame for today's downtick as the top-weighted technology sector (-0.3%) played an important supporting role.

The tech group suffered as mega-cap names like Apple (AAPL 152.76, -0.91) Microsoft (MSFT 69.84, -0.57), Facebook (FB 151.46, -0.92), and Alphabet (GOOGL 987.09, -9.08) settled with losses between 0.6% and 0.9%. Chipmakers outperformed the broader market after Analog Devices (ADI 85.76, +0.96) reported better than expected earnings and upbeat guidance. However, the PHLX Semiconductor Index (unch) still failed to reach its flat line. While the energy sector (-0.4%) doesn't have as much influence as the aforementioned groups, it did contribute to today's slip as crude oil weighed on investor sentiment. The commodity dropped 2.9% to $48.23/bbl amid concerns over heightened production in Libya. Reports indicate that Libya's oil production has risen to 827,000 barrels per day (bpd), which is significantly more than country's 2017 and 2016 averages of 500,000 bpd and 300,000 bpd, respectively. The lightly-weighted real estate group (-0.1%) also finished in negative territory. The seven remaining sectors settled in the green with gains between 0.2% and 0.5%.

Countercyclical spaces like utilities (+0.5%), telecom services (+0.4%), and health care (+0.4%) led the charge. Large-cap names like Pfizer (PFE 32.65, +0.52) and Johnson & Johnson (JNJ 128.25, +1.14) underpinned the health care sector, adding 1.6% and 0.9%, respectively. Biotech names also contributed to the sector's positive performance, evidenced by the 0.5% increase in the iShares Nasdaq Biotechnology ETF (IBB 285.75, +1.45). In earnings news, retailers produced a mixed batch of earnings reports. Michael Kors (KORS 33.18, -3.09) tumbled 8.5% to a fresh, five-year low after disappointing guidance overshadowed better than expected earnings and revenues. Conversely, Vera Bradley (VRA 9.41, +0.91) spiked 10.7% after better than expected earnings outweighed disappointing earnings guidance. The SPDR S&P Retail ETF (XRT 40.74, -0.01) finished flat. On the data front, investors received several economic reports on Wednesday, including May Chicago PMI, April Pending Home Sales, the Fed's Beige Book for May, and the weekly MBA Mortgage Applications Index:

Chicago PMI for May increased to 59.4 from 58.3 in April while the Briefing.com consensus expected a reading of 57.3. Pending Home Sales for April declined 1.3%. Today's reading follows a revised 0.9% decrease in March (from -0.8%). The Fed's Beige Book indicated modest to moderate economic growth from early April through late May for most of the 12 Federal Reserve Districts. The weekly MBA Mortgage Applications Index decreased 3.4% to follow last week's 4.4% increase.

Tomorrow, investors will receive a slew of economic reports, including ADP Employment Change for May (Briefing.com consensus 180,000) at 8:15 ET, Initial Claims (Briefing.com consensus 239,000) at 8:30 ET, first quarter Productivity (Briefing.com consensus -0.6%) at 8:30 ET, April Construction Spending (Briefing.com consensus 0.5%), and the May ISM Index (Briefing.com consensus 54.7) at 10:00 ET. May auto and truck sales will also be released throughout the day.

Nasdaq Composite +15.2% YTD

S&P 500 +7.7% YTD

Dow Jones Industrial Average +6.3% YTD

Russell 2000 +1.0% YTD