Day Traders Diary



The major averages have been extending their opening losses throughout the first half of Thursday's session with the S&P 500's most influential sectors--technology (-1.6%) and financials (-1.1%)--pacing the retreat. The tech-laden Nasdaq is the weakest index, dropping 1.5%, followed by the S&P 500 (-0.9%), and then the Dow (-0.6%).

Tensions between North Korea and the U.S. continue to run high after Pyongyang laid out the details of a plan to strike the U.S. territory of Guam by mid-August. The heightened geopolitical uncertainty may have gotten the bearish ball rolling today, but the follow through points to a market that many believed was already overdue for a pullback.

The signs have been there for a little while as both the Dow Jones Transportation Average and the Russell 2000, which are seen as leading indicators, have been underperforming, Treasuries have been rallying, and a strong earnings reporting period has been met with a largely muted response from investors.

Still, today's slide is pretty modest in the grand scheme of things as the benchmark S&P 500 remains 9.3% higher for the year. Even more impressive, the Nasdaq and the Dow hold year-to-date gains of 15.9% and 10.8%, respectively. Both the S&P 500 and the Dow hit all-time highs on Monday while its been just a little over a week since the Nasdaq closed at a record high.

Ten of eleven sectors currently trade in negative territory with the lightly-weighted utilities group (+0.2%) being the lone advancer. As mentioned in the opening line, the top-weighted technology (-1.6%) and financials (-1.1%) sectors exhibit relative weakness. The consumer discretionary sector (-1.1%) is also struggling to keep pace with the broader market as retailers weigh.

The SPDR S&P 500 Retail ETF (XRT 39.50, -1.14) has dropped 2.8% in today's session with Kohl's (KSS 38.95, -2.98) and Macy's (M 20.77, -2.26) leading the retreat. The two department store retailers have lost 7.1% and 9.7%, respectively, despite reporting better than expected earnings this morning. 

Outside of the equity market, safe-haven assets like U.S. Treasuries and gold are trading higher, as is the CBOE Volatility Index (VIX 15.33, +4.22), which has spiked 37.5% to a three-month high. Gold is up 0.9% at $1,290.53/ozt, marking its best level in two months, while the benchmark 10-yr yield has slipped three basis points to 2.22%.

Reviewing Thursday's economic data, which included the July Producer Price Index and the weekly Initial Claims Report:

  • July producer prices came in at -0.1%, which is below the consensus of +0.2%. Core producer prices also declined 0.1% while the consensus expected an increase of 0.2%.
    • The Producer Price Index (PPI) report for July was weaker than expected. The key takeaway from the report is that the downturn in producer prices will presumably keep a lid on consumer inflation expectations.
  • The latest weekly initial jobless claims count totaled 244,000 while the consensus expected a reading of 240,000. Today's tally was above the revised prior week count of 241,000 (from 240,000). As for continuing claims, they declined to 1.951 million from the revised count of 1.967 million (from 1.968 million).
    • There are no new takeaways from those data series, which remain at low levels reflective of a tight labor market.

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