Day Traders Diary

9/25/17

The U.S. equity market slipped on Monday as investors dialed back their technology holdings with just a few days left in the third quarter. Naturally, the tech-heavy Nasdaq (-0.9%) was the weakest major average, but found support at its 50-day simple moving average (6,362). Meanwhile, the S&P 500 and the Dow lost 0.2% apiece.

Wall Street rotated out of the S&P 500's technology sector, which has led the stock market's 2017 campaign, in favor of some groups that have struggled so far this year, such as energy (+1.5%), consumer staples (+0.7%), telecom services (+0.9%), and real estate (+0.3%). 

In addition to a sector rotation, there was a market-cap rotation on Monday, evidenced by the S&P MidCap 400 (+0.2%) and the small-cap Russell 2000 (+0.1%), both of which finished ahead of the broader market. The Russell 2000 also settled at a new all-time high.

Facebook (FB 162.87, -7.67) was one of the weakest technology components, dropping 4.5% to settle below its 50-day simple moving average (169.11) for the first time since July 6. Fellow mega-cap tech names like Apple (AAPL 150.55, -1.34), Microsoft (MSFT 73.26, -1.15), and Alphabet (GOOGL 934.28, -8.98) also struggled, losing between 0.9% and 1.6%.

Chipmakers also tumbled on Monday, sending the PHLX Semiconductor Index lower by 2.0%. NVIDIA (NVDA 171.00, -8.00) and Micron Technology (MU 34.87, -1.20) exhibited particular weakness, losing 4.5% and 3.3%, respectively. Micron will release its latest earnings report on Tuesday afternoon.

Tech stocks were weak from the jump, but the sell off intensified after North Korea's foreign minister said that U.S. President Donald Trump has effectively declared war on his country and, therefore, Pyongyang has the right to take countermeasures against the U.S, including shooting down U.S. strategic bombers even if they're not in North Korean airspace.

The White House responded by saying the allegation is "absurd."

U.S. Treasuries held gains in the early morning and then advanced to new session highs following the North Korea comments. The benchmark 10-yr yield, which moves inversely to the price of the 10-yr Treasury note, slipped four basis points to 2.22%, settling near its session low. The 2-yr yield held up a bit better, finishing just one basis point below its flat line at 1.42%. 

In Europe, Angela Merkel won a fourth term as Germany's chancellor on Sunday, but the far-right Alternative for Germany (AfD) party did better than expected, effectively weakening Ms. Merkel's CDU/CSU alliance. The euro dropped 0.9% to 1.1849 against the U.S. dollar on Monday while the German bund yield tumbled five basis points to 0.40%.

Investors did not receive any economic data on Monday.

However, on Tuesday, market participants will receive several economic reports, including the Case-Shiller 20-City Composite Home Price Index for July (Briefing.com consensus +5.8%) at 9:00 ET, the Conference Board's Consumer Confidence Index for September (Briefing.com consensus 119.4) at 10:00 ET, and August New Home Sales (Briefing.com consensus 577K) also at 10:00 ET.

• Nasdaq Composite +18.3% YTD
• Dow Jones Industrial Average +12.8% YTD
• S&P 500 +11.5% YTD
• Russell 2000 +7.0% YTD