Day Traders Diary

7/11/17

The S&P 500 gave back its slim Monday advance in the second session of the week, dropping 0.1%, with nine of its eleven sectors settling in negative territory. Meanwhile, the Nasdaq (+0.3%) cruised to its second win of the week as technology stocks outperformed and the Dow (unch) eked out a very narrow victory.

With the week's first major event--Wednesday's testimony from Fed Chair Janet Yellen--on the horizon, investors were cautious at the start of Tuesday's session, leaving the S&P 500 near its unchanged mark for the majority of the morning. However, the benchmark index made a sharp move into the red around 11:00 ET, dropping as low as 0.6% below its flat line, after Donald Trump Jr. tweeted an email exchange that involved him setting up a meeting with a Russian lawyer in an attempt to gain some possibly incriminating information on then-presidential candidate Hillary Clinton.

The market's initial reaction was likely prompted by the notion that there might have been collusion between Russia and the Trump campaign to influence the outcome of the U.S. presidential election. However, the risk-off sentiment didn't stick and the benchmark index quickly rebounded, retracing about half of its loss in just 30 minutes.

Outside of the equity market, safe-haven assets like U.S. Treasuries, gold, and the Japanese yen did move modestly higher on Tuesday, but the CBOE Volatility Index (VIX 10.91, -0.20)--which points to the market's anticipation of short-term uncertainty--declined by 1.8%. Gold climbed 0.2% to $1,215.90/ozt, the yen added 0.2% against the U.S. dollar, and the benchmark 10-yr yield--which moves inversely to the price of the 10-yr Treasury note--dropped one basis point to 2.36%.

Only the energy and technology sectors finished Tuesday in the green with energy (+0.5%) being the top-performing group, thanks in large part to crude oil's positive performance. The commodity jumped 1.5% to $45.07/bbl despite trading around 1.0% below its Monday closing price in early-morning action. It's tough to credit a single bullish catalyst for crude oil's advance as technical forces have been coming into play within the crude futures market as of late, but it's worth noting that a European inventory report showed a decline in European product stockpiles.

Meanwhile, the top-weighted technology sector (+0.4%) put together another solid performance, extending its two-day gain to 1.2%, with Facebook (FB 155.27, +1.77) showing relative strength. FB shares jumped to a new session high after the company announced that ads for Facebook Messenger will become available to advertisers globally. Chipmakers also outperformed, pushing the PHLX Semiconductor Index higher by 0.8%.

On the downside, the influential financial sector (-0.7%) struggled on Tuesday, especially following the release of Donald Trump Jr.'s email exchange, and eventually settled with the telecom services group (-0.7%) at the very bottom of the day's leaderboard. However, Dow component Goldman Sachs (GS 226.95, +1.11) was able to register its second win of the week, climbing 0.5%.

In Washington, Senate Majority Leader Mitch McConnell announced that the upper house will delay its August recess by two weeks, giving Senate Republicans some extra time to iron out their version of the health care reform bill. The health care sector (-0.1%) finished in line with the broader market.

Reviewing today's economic data, which was limited to May Wholesale Inventories and May JOLTS:

May Wholesale Inventories increased 0.4% (Briefing.com consensus +0.3%). The prior month's reading was revised to -0.4% from -0.5%.

The market doesn't typically pay much attention to this release since the full business inventories report is usually released a short time later.

The May Job Openings and Labor Turnover Survey showed that job openings decreased to 5.666 million from a revised 5.967 million (from 6.044 million) in April.

On Wednesday, investors will receive the weekly MBA Mortgage Applications Index and the Fed's Beige Book for July. The two reports will be released at 7:00 ET and 14:00 ET, respectively.

Nasdaq Composite +15.1% YTD

S&P 500 +8.3% YTD

Dow Jones Industrial Average +8.3% YTD

Russell 2000 +4.1% YTD