Day Traders Diary

6/20/17

 In a nutshell, 'easy come, easy go' sums up Tuesday's session as the stock market gave back nearly all of Monday's climb to new record highs. The Nasdaq (-0.8%) and the Dow (-0.3%) settled on opposite sides of the benchmark S&P 500 (-0.7%) while the small-cap Russell 2000 (-1.1%) underperformed.

The major averages opened Tuesday's session modestly lower with the energy sector (-1.3%) showing relative weakness. Crude oil futures plagued the energy group, dropping as low as $42.95 per barrel, as concerns about excess supply, and a deteriorating technical picture, continued to weigh on the commodity. The energy sector retraced some of its early loss, as did crude oil, but the sector still finished at the bottom of the day's leaderboard. WTI crude closed 2.1% lower at a price of $43.53 per barrel.

In general, cyclical sectors struggled amid the day's risk-off tone. Like energy, the consumer discretionary (-1.3%) and industrials (-1.2%) groups finished comfortably behind the benchmark index amid broad weakness. However, homebuilders were a pocked of strength within the consumer discretionary space, pushing the iShares U.S. Home Construction ETF (ITB 34.00, +0.12) higher by 0.4%, after Lennar (LEN 53.87, +1.13) reported better than expected earnings and revenues. In the industrial sector, transports underperformed, evidenced by the 1.8% decrease in the Dow Jones Transportation Average.

The top-weighted technology (-0.8%) and financials (-0.8%) sectors finished just a tick behind the broader market with just a handful of components managing to settle in the green. In the financial space, American Express (AXP 82.51, +0.63) was the top-performer, adding 0.8%. Meanwhile, tech heavyweights Oracle (ORCL 45.84, +0.11) and Adobe Systems (ADBE 140.91, +0.56) outperformed, adding around 0.3% apiece, ahead of their latest earnings reports.

On the countercyclical side, the heavily-weighted health care sector (+0.3%) settled at the top of the day's leaderboard, thanks in large part to the outperformance of the biotechnology industry. The iShares Nasdaq Biotechnology ETF (IBB 303.59, +3.80) increased by 1.3% with names like Regeneron Pharmaceuticals (REGN 495.33, +23.66), Alexion Pharmaceuticals (ALXN 119.05, +2.89), and Biogen (BIIB 266.00, +5.46) leading the charge.

The lightly-weighted utilities group (+0.1%) also managed to settle in the green, but the remaining defensive-oriented sectors--consumer staples (-0.4%) and telecom services (-1.0%)--finished in the red.

U.S. Treasuries moved higher in a curve-flattening trade on Tuesday with the 2-yr (1.35%) and 10-yr (2.16%) yields slipping one basis point and three basis points, respectively. Meanwhile, in the currency market, the U.S. Dollar Index (97.43, +0.20) registered its second-consecutive win, climbing 0.2%.

The greenback showed notable strength against the British pound (1.2630), adding 0.9%, following dovish remarks from Bank of England Governor Mark Carney, who said that the BoE should not rush to hike interest rates.

It's also worth noting that Fed Vice Chair Stanley Fischer (FOMC voter) and Boston Fed President Eric Rosengren (non-FOMC voter) both commented on the potential downside of keeping interest rates too low for too long. Mr. Fischer focused on the risks to the housing market while Mr. Rosengren discussed the effects on the overall financial system.

Tuesday's lone economic report--first quarter Current Account Balance--came in better than expected, showing a deficit of $116.8 billion (Briefing.com consensus -$123.4 billion). The fourth quarter deficit was revised to $114.0 billion from $112.4 billion.

On Wednesday, investors will receive the weekly MBA Mortgage Applications Index and May Existing Homes Sales (Briefing.com consensus 5.52 million). The two reports will be released at 7:00 ET and 10:00 ET, respectively.

Nasdaq Composite +15.0% YTD

S&P 500 +8.9% YTD

Dow Jones Industrial Average +8.6% YTD

Russell 2000 +3.4% YTD