Day Traders Diary

6/27/17

Wall Street took it to the chin on Tuesday as equities sold off into the closing bell, leaving the major averages at their worst marks of the day. The tech-heavy Nasdaq (-1.6%) was hit the hardest as technology and biotechnology stocks weighed. Meanwhile, the S&P 500 and the Dow settled with losses of 0.8% and 0.5%, respectively.

There was a notable jump in long-term rates on Tuesday as sovereign bond markets came under selling pressure in the wake of a morning remark from ECB President Mario Draghi that the threat of deflation is gone. The yield on the 10-yr Treasury note jumped six basis points to 2.20%, which contributed partly to the selling activity in richly-valued technology stocks and the underperformance of rate-sensitive areas like the S&P 500 utilities sector (-1.3%).

However, the heavily-weighted financial sector (+0.5%) benefited from the activity in the Treasury market as it resulted in a steepening of the yield curve, which is a positive for the financial industry's bottom line. The win marks the second in a row for the financial group and comes ahead of tomorrow's capital return plans, which will be released after the close.

Like financials, the energy sector (-0.2%) finished ahead of the broader market as crude oil cruised to its fourth-consecutive advance. Underpinned by a weaker dollar, the energy component jumped 2.0% to $44.25/bbl. Meanwhile, the U.S. Dollar Index (96.07, -1.04) tumbled 1.1% to a fresh nine-month low in reaction to the aforementioned remark from Mr. Draghi.

However, in the end, the bulls were just no match for the bears on Tuesday as ten of the eleven sectors finished in the red. The top-weighted technology group (-1.7%) finished at the very bottom of the leaderboard amid broad weakness. Alphabet (GOOGL 948.09, -24.00) was one of the sector's weakest components, dropping 2.5%, after European antitrust regulators hit the company with a $2.7 billion fine for skewing search results in favor of its own shopping site. Chipmakers also displayed notable weakness, sending the PHLX Semiconductor Index lower by 2.7%.

The lightly-weighted telecom services space (-1.4%) finished just a tick ahead of the technology group following news that Sprint (S 8.18, +0.17) has entered into exclusive talks with Charter Communications (CHTR 329.87, -2.78) and Comcast (CMCSA 39.25, -0.34) regarding a wireless deal. Wireless heavyweights Verizon (VZ 44.84, -0.91) and AT&T (T 37.70, -0.45) declined 2.0% and 1.2%, respectively, following the news.

Biotechnology stocks also exhibited notable weakness, leaving the iShares Nasdaq Biotechnology ETF (IBB 310.89, -8.65) lower by 2.7%, as investors took some money off the table following last week's biotech rally. However, the health care sector (-0.9%) held up relatively well, settling just a tick below the benchmark index.

Outside of real estate (-0.4%), the remaining laggards--consumer discretionary (-0.7%), industrials (-0.8%), materials (-0.7%), and consumer staples (-0.9%)--finished roughly in line with the broader market.

Also of note, the Senate decided to push back a vote on the Republican healthcare bill until after Congress returns from the July Fourth recess, as most expected.

Reviewing Tuesday's economic data, which included the June Consumer Confidence Index and the April Case-Shiller 20-city Index:

The consumer confidence reading for June rose to 118.9 from the prior month's revised reading of 117.6 (from 117.9). The Briefing.com consensus expected the survey to hit 116.7.

The key takeaway from the report is that consumer expectations for the short-term have been reined in some, but are still upbeat overall.

The April Case-Shiller 20-city Index hit 5.7% (Briefing.com consensus 5.9%) to follow last month's unrevised 5.9% increase.

On Wednesday, investors will receive the weekly MBA Mortgage Applications Index and May Pending Home Sales (Briefing.com consensus 0.5%). The two reports will be released at 7:00 ET and 10:00 ET, respectively.

Nasdaq Composite +14.2% YTD

S&P 500 +8.1% YTD

Dow Jones Industrial Average +7.8% YTD

Russell 2000 +3.4% YTD