Day Traders Diary

9/6/17

 U.S. equities reclaimed a chunk of Tuesday's swoon on Wednesday as each of the three major indices--the S&P 500, the Dow, and the Nasdaq--settled with modest gains of 0.3% apiece. Small caps finished roughly in line with the broader market, evidenced by the Russell 2000, which climbed 0.2%. For the week, the S&P 500 is now lower by 0.4%.

In Washington, President Trump and Democratic leaders agreed to a package deal that includes $7.85 billion for Hurricane Harvey relief efforts and a three-month extension of both the debt ceiling and government funding. It's unclear if the proposal will have the support to make it through Congress however; House Speaker Paul Ryan (R-WI) said that the aforementioned deal was "unworkable" while Senate Majority Leader Mitch McConnell (R-KY) said that he is willing to add the three-month extension to the $7.85 billion flood relief bill--which the House passed as a stand-alone bill on Wednesday.

It's worth noting that, if passed, the proposal would put an end-of-the-year showdown on the table, something that may negatively impact Republicans' goal of getting tax reform done by the year's end. Nonetheless, the stock market took the news in stride today, strengthening into the afternoon, and the Treasury market weakened, sending the benchmark 10-yr yield four basis points higher to 2.11%.

The energy sector (+1.6%) finished comfortably ahead of its peers as crude oil moved higher, climbing 1.0% to a price of $49.14/bbl. The commodity has rallied both days this week as oil refineries along the Texas coast have started coming back online following Hurricane Harvey. On a related note, Hurricane Irma hit the Caribbean on Wednesday morning, moving towards Puerto Rico.

In total, nine of the eleven sectors finished in the green with the consumer discretionary space (+0.6%) settling behind the energy group at the top of the leaderboard. As for the laggards, the lightly-weighted utilities and telecom services groups finished with losses of 0.5% and 1.2%, respectively.

On the corporate front, toy makers like Mattel (MAT 15.69, -0.52) and Hasbro (HAS 93.66, -1.86) dropped 3.2% and 2.0%, respectively, following news that Toys "R" Us is considering a possible bankruptcy filing. Dave & Buster's (PLAY 51.41, -6.73) also finished solidly lower, dropping 11.6%, after lowering its comparable same-store sales guidance for fiscal year 2018.

Also of note, Fed Vice Chair Stanley Fischer offered President Trump his resignation on Wednesday morning, citing personal reasons. Mr. Fischer plans to step down in mid-October.

Reviewing Wednesday's economic data, which included the August ISM Services Index, the July Trade Balance, and the weekly MBA Mortgage Applications Index:

The ISM Services Index for August rose to 55.3 from an unrevised reading of 53.9 in July. The Briefing.com consensus expected a reading of 55.2.

The key takeaway from the report -- other than the important services sector remains in an expansion mode -- is that the uptick in July was paced by an increase in new orders and employment.

The July trade balance showed a deficit of $43.7 billion while the Briefing.com consensus expected the deficit to hit $44.6 billion. The previous month's deficit was revised to $43.5 billion from $43.6 billion.

The key takeaway from the report is that it should compute favorably for Q3 GDP forecasts considering the real trade deficit for July ($61.6 billion) was 1.3% below the second quarter average.

The weekly MBA Mortgage Applications Index increased 3.3% to follow last week's 2.3% decrease.

In addition, the Fed's Beige Book for September showed that economic activity expanded at a modest to moderate pace across all 12 Federal Reserve Districts in July and August. A special note was added for Hurricane Harvey, saying the storm created broad disruptions to economic activity in the Dallas and Atlanta districts, but it's still too soon to gauge the full extent of the impact.

On Thursday, investors will receive the revised readings for second quarter Productivity (Briefing.com consensus 1.2%) and Unit Labor Costs (Briefing.com consensus 0.3%) at 8:30 ET, the weekly Initial Claims Report (Briefing.com consensus 239K) also at 8:30 ET, and July Consumer Credit (Briefing.com consensus $15.0 billion) at 15:00 ET.

Nasdaq Composite +18.8% YTD

S&P 500 +10.1% YTD

Dow Jones Industrial Average +10.4% YTD

Russell 2000 +3.3% YTD