Day Traders Diary

6/23/17

Wall Street ended the week on a positive note as the S&P 500 (+0.2%) cruised to a modest victory on the back of the technology (+0.7%) and energy (+0.8%) sectors. The Nasdaq (+0.5%) and the Russell 2000 (+0.7%) outperformed while the Dow (unch) settled just a tick below its unchanged mark.

Equity indices opened Friday's session with slim losses, but quickly moved into positive territory. From there, the stock market stalled and began trending sideways with a modest gain as the bulls and the bears went toe to toe. Buyers rallied around the technology, energy, and industrials groups while sellers took control of the financials, consumer discretionary, and health care spaces.

The energy group (+0.8%) was the strongest sector out of the gate, despite early weakness in the crude oil futures market. However, WTI crude quickly regained its footing and cruised to its second win of the week, ending Friday's session higher by 0.6% at a price of $43.01/bbl. However, for the week, WTI crude settled lower by 4.0%.

Despite a slow start, the top-weighted technology sector (+0.7%) eventually climbed to the top of the day's leaderboard. The tech space benefited from broad strength with mega-cap names like Apple (AAPL 146.35, +0.72), Facebook (FB 155.07, +1.67), Alphabet (GOOGL 986.09, +9.47), and Microsoft (MSFT 71.21, +0.95) adding between 0.5% and 1.4%.

The industrial space (+0.4%) also contributed to the bulls' cause with transports showing relative strength. The Dow Jones Transportation Average (+0.7%) easily outpaced the broader market with names like FedEx (FDX 215.35, +3.72) and Norfolk Southern (NSC 119.29, +1.89) leading the charge. The lightly-weighted materials (+0.4%) and real estate (+0.4%) sectors also outperformed.

However, on the flip side, the influential financials (-0.5%), consumer discretionary (-0.1%), and health care (-0.1%) sectors weighed on the broader market. The financial sector suffered from broad weakness and continued to move deeper into negative territory as the day wore on. Conversely, the health care and consumer discretionary spaces rallied a bit in the final stretch to end little changed.

Biotech stocks weighed on the health care group for much of the day as investors engaged in some profit taking following the iShares Nasdaq Biotechnology ETF's (IBB 320.74, +0.63) four-day rally. However, the IBB eventually shook off the bearish sentiment, settling higher by 0.2%.

In the consumer discretionary sector, home improvement retailers weighed with Home Depot (HD 151.31, -4.17) and Lowe's (LOW 76.07, -2.27) losing 2.7% and 2.9%, respectively. The sector's worst-performing component, however, was Bed Bath & Beyond (BBBY 29.65, -4.09), which plunged 12.1% after the company missed top and bottom line estimates.

The bears made a last-ditch effort in the final stretch, but the bulls were able to hold on for the S&P 500's second win of the week. Today's uptick left the benchmark index higher by 0.2% for the week.

Outside of the stock market, U.S. Treasuries settled modestly higher across the curve on Friday with the benchmark 10-yr yield slipping one basis point to 2.14%. Meanwhile, the CBOE Volatility Index (VIX 10.02, -0.45, -4.1%) closed at the historically-low 10.00 mark.

Reviewing Friday's economic data, which was limited to New Home Sales for May:

New Home Sales in May hit an annualized rate of 610,000, which was above the revised April rate of 593,000 (from 569,000), and more than the 599,000 that was expected by the Briefing.com consensus.

The key takeaway from the report is that affordability constraints driven by rising median prices are going to continue to serve as a headwind for first-time buyers who are facing added supply constraints in the existing home market.

Investors will not receive any economic data on Monday.

Nasdaq Composite +16.4% YTD

S&P 500 +8.9% YTD

Dow Jones Industrial Average +8.3% YTD

Russell 2000 +4.3% YTD

Week In Review: Biotech Rumbles, Crude Oil Tumbles

After some teeter tottering at the start of the week, the S&P 500 settle into a sideways trend, drifting alongside its unchanged mark, as investors lacked conviction to decisively move the market one way or the other. In the end, the benchmark index sealed its second-consecutive weekly win with a slim gain of 0.2%.

Wall Street kicked off the week on a positive note with both the S&P 500 and the Dow advancing to new all-time highs. The Nasdaq exhibited relative strength as technology and biotechnology stocks outperformed, bucking their recent bearish trends, with names like Apple (AAPL) and Biogen (BIIB) leading the charge. Financials also posted a solid performance, continuing their bullish two-week run.

The tide turned on Tuesday as the benchmark index coughed up nearly all of Monday's advance. The energy sector finished at the bottom of the leaderboard, for the second day in a row, as crude oil continued to tumble amid excess supply concerns. However, despite the bearish tone, biotechnology stocks kept chugging along, pushing the iShares Nasdaq Biotechnology ETF (IBB) higher by 1.3%.

Range-bound action set in on Wednesday as the heavily-weighted health care and technology sectors upheld the S&P 500 amid weakness in the broader market. Staying true to the week's trend, biotech companies were bullish, advancing the IBB higher by 4.1%, while crude oil was bearish, dropping another 2.3%, despite a relatively upbeat inventory report from the Department of Energy.

Investors shifted their attention to Washington on Thursday as the Senate rolled out its version of the healthcare reform bill. Compared to the version that the House passed last month, the Senate's version would roll back the Affordable Care Act's Medicaid expansion more gradually, but the cuts to Medicaid would be larger in total. However, in general, the two versions of the bill are very similar.

The health care sector took the news in stride, moving higher by 1.1%, but the S&P 500 settled slightly lower as the financials, consumer staples, and utilities sectors weighed. Crude oil did manage to secure its first win of the week, but the advance was modest in comparison to the commodity's recent swoon. Moving into Friday's session, the energy component held a week-to-date loss of 4.5%.

Equities ended the week on a positive note as the technology and energy sectors fended off the negatively-charged financials, consumer discretionary, and health care groups. Biotech stocks fell to some profit-taking efforts early, but the IBB still managed to pull out a win, ending the week higher by 9.6%. Crude oil registered another modest win on Friday, but ended the week lower by 4.0%.

Market participants altered their rate-hike expectations a bit this week following comments from several FOMC voters, including Fed Vice Chair Fischer, Fed Governor Powell, New York Fed President Dudley, Chicago Fed President Evans, and Dallas Fed President Kaplan.

The fed funds futures market now points to the December FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 51.3%, up from last week's 43.4%.