Day Traders Diary

10/17/17

Stocks ticked higher for the third session in a row on Tuesday as investors digested another round of earnings. The Dow (+0.2%) traded above the 23,000 mark for the first time in history and eventually settled at a new all-time high. The S&P 500 (+0.1%) also eked out a new record close, while the Nasdaq (unch) came up just short, finishing a tick beneath its unchanged mark.

Health care stocks rallied on Tuesday, led by Dow component UnitedHealth (UNH 203.89, +10.69), which surged 5.5% after reporting better-than-expected earnings and raising its earnings guidance slightly. The advance marked the company's largest one-day price gain since it went public 33 years ago and left UNH shares at a new all-time high. 

UnitedHealth is one of the priciest--and therefore one of the most influential--components within the price-weighted Dow and had much to do with the industrial average's relatively positive Tuesday performance. Fellow health care heavyweight and Dow component Johnson & Johnson (JNJ 140.79, +4.67) also underpinned the blue-chip average, adding 3.4% on above-consensus earnings and revenues.

Naturally, the S&P 500's health care sector (+1.3%) finished at the top of the day's sector standings, followed from a distance by the utilities (+0.6%), telecom services (+0.2%), and energy (+0.1%) groups. Most of the seven remaining sectors finished in negative territory, but losses were pretty modest. For instance, the financial sector was the weakest group with a loss of 0.6%.

Financial heavyweights Goldman Sachs (GS 236.09, -6.32) and Morgan Stanley (MS 49.12, +0.18) delivered impressive earnings reports on Tuesday, with both companies surpassing top and bottom line estimates, but Goldman dropped 2.6% nonetheless. Morgan Stanley added more than 2.0% in the opening minutes, but eventually trimmed that gain to 0.4% by the closing bell.

Meanwhile, Netflix (NFLX 199.48, -3.20) retreated from record highs after reporting below-consensus earnings on Monday evening. However, the on-demand entertainment provider did add nearly a million more subscribers than expected in the third quarter. NFLX shares ended Tuesday lower by 1.6%.

U.S. Treasuries settled mostly higher on Tuesday, with longer-dated issues exhibiting relative strength. The yield on the benchmark 10-yr Treasury note dropped one basis point to 2.30% while the 2-yr yield finished unchanged at 1.54%. Meanwhile, the U.S. Dollar Index climbed 0.4% to 93.37--closing at a one-week high.

Reviewing Tuesday's batch of economic data, which included September Industrial Production and Capacity Utilization, September Import/Export Prices, and the October NAHB Housing Market Index:

• Industrial Production increased 0.3% in September (Briefing.com consensus +0.2%), while the August reading was revised to -0.7% (from -0.9%). Capacity Utilization rose to 76.0% (Briefing.com consensus 76.1%) from a revised reading of 75.8% in August (from 76.1%).
  • The key takeaway from the report is that total production in September was held down by the continued effects of Hurricane Harvey and, to a lesser extent, the effects of Hurricane Irma, which combined lowered industrial production growth by 1/4 percentage point.
• Import prices excluding oil rose 0.3% in September after increasing 0.3% in August. Export prices excluding agriculture increased 1.0% in September after rising a revised 0.8% in August (from 0.7%).
  • The key takeaway is that these price trends will validate the prevailing belief that the Federal Reserve is likely to raise the fed funds rate at its December meeting.
• The NAHB Housing Market Index for October rose to 68 (Briefing.com consensus 64) from an unrevised reading of 64 in September.

On Wednesday, investors will receive just two pieces of economic data--the weekly MBA Mortgage Applications Index and September Housing Starts (Briefing.com consensus 1160K). The two reports will cross the wires at 7:00 ET and 8:30 ET, respectively.

As for earnings, Abbott Labs (ABT 55.06, +0.43) and U.S. Bancorp (USB 53.88, -0.38) are the most notable names on Wednesday morning's docket.

• Nasdaq Composite +23.0% YTD
• Dow Jones Industrial Average +16.4% YTD
• S&P 500 +14.3% YTD
• Russell 2000 +10.3% YTD