Day Traders Diary

6/30/17

  The stock market was on track to end Friday on its session high, but quarter-end selling during the final minutes of the action knocked the key indices off their afternoon highs. The S&P 500 added 0.2%, trimming this week's loss to 0.6%, while the Nasdaq Composite (-0.1%) underperformed, widening its weekly decline to 2.0%. Shielded from this week's underperformance in technology, the Dow Jones Industrial Average (+0.3%) shed just 0.2% for the week.

Equity indices began the day with modest gains that were a by-product of relative strength in groups like consumer discretionary (+0.6%), industrials (+0.8%), and energy (+0.4%) while top-weighted sectors like financials (-0.1%), technology (-0.1%), and health care (-0.1%) could not stay away from their flat lines. The three influential groups reluctantly followed the market higher in the afternoon, but a wave of selling in the final minutes of the session knocked the market to lows.

The discretionary sector received an early boost from NIKE (NKE 59.00, +5.83) after the apparel heavyweight beat fourth quarter expectations. The company issued cautious revenue guidance for the first quarter, but its top-line outlook for the full year was in line with expectations. In addition to reporting results, NIKE announced a pilot program to begin selling its products on Amazon (AMZN 968.00, -7.93). Shares of NIKE soared 11.0%, helping the Dow Jones Industrial Average spend the day ahead of its peers. Apparel retailers had a good showing overall and the SPDR S&P Retail ETF (XRT 40.74, +0.26) rose 0.6%.

Like the discretionary sector, industrials outperformed throughout the day. Transport stocks fueled the rally as the Dow Jones Transportation Average climbed 0.9%, extending its June gain to 4.4%.

The energy sector (+0.4%) was not far behind, catching a bid amid a 2.6% spike in crude oil, which jumped to $46.03/bbl and snapped its five-week skid. WTI crude gained 7.0% for the week while the energy sector advanced 0.7%, finishing only behind financials (week-to-date +3.3%).

The lightly-weighted materials sector (+0.5%) also finished ahead of the broader market while the remaining groups settled closer to their flat lines. Technology saw an intraday gain, which vanished during the late-afternoon slide. Micron (MU 29.86, -1.61) reported better than expected quarterly results, but the stock slid 5.1% nonetheless. The broader PHLX Semiconductor Index fell 0.5%, losing 4.9% for the week.

Treasuries held modest losses in morning action before retreating into the close. The benchmark 10-yr yield rose three basis points to 2.30%.

Economic data included Personal Income/Spending, Chicago PMI, and Michigan Sentiment:

Personal income increased 0.4% in May (Briefing.com consensus +0.3%) after a downwardly revised 0.3% increase (from 0.4%) for April. Personal spending was up 0.1%, as expected, following an unrevised 0.4% increase in April. The core PCE Price Index, which excludes food and energy, increased 0.1%, as expected.

The key takeaway is that inflation moved away from the Fed's longer-run inflation target of 2.0%, not toward it as the Fed is anticipating. That will help solidify the market's belief that the Fed doesn't have enough data-based scope to raise the fed funds rate until perhaps its December meeting at the earliest.

The Chicago Business Barometer, otherwise known as the Chicago Purchasing Managers Index, jumped to 65.7 in June (Briefing.com consensus 57.8) from 59.4 in May.

The key takeaway from the report is that the New Orders Index served as the springboard for the June jump, rising from 61.4 to 71.9 and signaling solid manufacturing demand in the Chicago Fed region.

The University of Michigan's Index of Consumer Sentiment was revised from the preliminary reading of 94.5 for June to 95.1 with the final reading. The latter was above the briefing.com consensus estimate of 94.7, but below the final May reading of 97.1.

The key takeaway from the report is that consumer confidence has dipped to its lowest level since the election, yet it still remains at favorable levels as the average level of 96.8 for the first half of the year was the best half-year average since the second half of 2000.

Monday's economic data will feature the 10:00 ET release of May Construction Spending and June ISM Index while June auto and truck sales will be reported throughout the abbreviated session, which will end at 13:00 ET.

Nasdaq Composite +14.1% YTD

S&P 500 +8.2% YTD

Dow Jones Industrial Average +8.0% YTD

Russell 2000 +4.3% YTD

Week In Review: Nasdaq Stumbles