Day Traders Diary



The stock market notched another record high on Wednesday, with financials and technology stocks pacing the advance. The Dow added 0.7% and finished comfortably ahead of both the S&P 500 (+0.1%) and the Nasdaq (unch), thanks in large part to IBM (IBM 159.53, +12.99), which climbed 8.9% in reaction to its better-than-expected earnings report. The small-cap Russell 2000 (+0.5%) showed relative strength, but, unlike the other indices, it did not finish at a new record high.

Trading ranges were narrow on Wednesday, with the S&P 500 sporting a gain between 0.01% and 0.19% from start to finish.

Goldman Sachs (GS 242.03, +5.94) retraced just about all of its Tuesday decline in the midweek session, surging higher by 2.5% and helping the S&P 500's financial sector (+0.6%) finish at the top of the sector standings. As a reminder, Goldman reported above-consensus earnings and revenues on Tuesday morning, but plunged to a fresh October low nonetheless. Morgan Stanley (MS 50.15, +1.03) also had a belated earnings rally, jumping 2.1%.

The top-weighted technology sector (+0.3%) started Wednesday's session little changed, but strengthened over the course of the day, eventually settling near the top of the leaderboard. Within the group, IBM was by far the top performer after exceeding profit and sales expectations. However, the sector's top component by market cap--Apple (AAPL 159.76, -0.71)--held gains in check, losing 0.4%.

Only two other sectors finished in positive territory--health care (+0.2%) and industrials (+0.1%). Transports helped the industrial space, evidenced by the 0.8% increase in the Dow Jones Transportation Average, while health care leaned on names like AbbVie (ABBV 96.04, +3.87) and Anthem (ANTM 191.79, +4.53), which added 4.2% and 2.4%, respectively. Anthem announced that it plans to partner with CVS Health (CVS 74.10, +1.47) to launch its own pharmacy benefit manager after its current contract with Express Scripts (ESRX 57.77, +0.56) ends it 2020.

On the flip side, the telecom services (-0.6%) and energy (-0.7%) sectors fell amid broad weakness, finishing at the very bottom of the sector standings. Within the energy group, Chevron (CVX 118.15, -2.07) exhibited particular weakness after both Societe Generale and BMO Capital Markets downgraded the Dow component on Wednesday morning. CVX shares lost 1.7%.

WTI crude futures climbed 0.3% to $52.04 per barrel after the Energy Information Administration reported that U.S. crude stockpiles declined by 5.7 million barrels last week; the consensus estimate called for a draw of 3.3 million barrels. However, gasoline inventories increased by 0.9 million barrels, possibly signaling a downtick in demand.

U.S. Treasuries ended the midweek session on a lower note with longer-dated issues pacing the decline. The benchmark 10-yr yield, which moves inversely to the price of the 10-yr Treasury note, climbed four basis points to 2.34%. Meanwhile, the 2-yr yield jumped two basis points to 1.56%.

Reviewing Wednesday's economic data, which included September Housing Starts, the Fed's Beige Book for October, and the weekly MBA Mortgage Applications Index:

  • Housing starts decreased to a seasonally adjusted annualized rate of 1.127 million units in September ( consensus 1.160 million), down from a revised 1.183 million units in August (from 1.180 million). Building permits decreased to a seasonally adjusted 1.215 million in September ( consensus 1.225 million) from a revised 1.272 million in August (from 1.300 million).
    • The key takeaway from the report is that the weakness in starts and permits was concentrated in the South region, which suffered the biggest hit from the hurricanes, so one could reasonably assume that the October report will show better results.
  • The Fed's Beige Book for October showed that economic activity increased at a modest to moderate pace in all 12 of the Federal Reserve Districts in September through early October. The Richmond, Atlanta, and Dallas Districts reported major disruptions related to Hurricanes Harvey and Irma. Many Districts noted that employers were having difficulty finding qualified workers, but the shortage in labor had little effect on wages.
  • The weekly MBA Mortgage Applications Index increased 3.6% to follow last week's 2.1% decline.

On Thursday, investors will receive both the weekly Initial Claims Report ( consensus 236K) and the Philadelphia Fed Index for October ( consensus 20) at 8:30 ET. The third and last economic report--the Conference Board Leading Economic Index for September ( consensus 0.1%)--will be released at 10:00 ET.

As for earnings, Verizon (VZ 48.65, +0.25), Philip Morris (PM 112.51, -0.14), and Travelers (TRV 130.02, +1.37) are scheduled to report on Thursday morning.

  • Nasdaq Composite +23.1% YTD
  • Dow Jones Industrial Average +17.2% YTD
  • S&P 500 +14.4% YTD
  • Russell 2000 +10.9% YTD

All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.