Day Traders Diary

10/20/17

Equity futures are pointing to a higher start for the U.S. equity market, which has settled at a new record close for the last four sessions in a row. The S&P 500 futures are currently trading seven points above fair value and, at that level, the benchmark index is poised to open with a gain of 0.3%. For the week, the S&P 500 comes into Friday with a week-to-date gain of 0.4%.

The Senate took an expected, but important, step toward tax reform last night, approving a budget blueprint for 2018. The upper chamber will now have to reconcile its version with the version that the House passed earlier this month. If the two sides can reach an agreement, Republicans will have the ability to pass tax reform without any support from the Democrats.

Coming into today's session, the health care (+1.7% WTD) and utilities (+1.3% WTD) groups are hovering at the top of the week's sector standings, while the consumer staples (-1.0% WTD), energy (-0.7% WTD), and real estate (-0.7%) groups are sitting at the bottom. In total, six sectors hold week-to-date gains and five hold week-to-date losses.

U.S. Treasuries are trading lower this morning, with longer-dated issues showing relative weakness. The yield on the benchmark 10-yr Treasury note is up four basis points at 2.36%, while the 2-yr yield is flat at 1.56%. For the week, the 2-yr yield and the 10-yr yield have climbed six basis points and eight basis points, respectively.

Meanwhile, the U.S. Dollar Index is up 0.3% at 93.26--which places the index 0.3% above last Friday's closing level. The greenback's strength has worked against WTI crude futures, which are currently down 0.7% at $51.15/bbl. For the week, the commodity is down 0.6%.

Investors will receive just one economic report today--September Existing Homes Sales (Briefing.com consensus 5.29 million)--which will be released at 10:00 ET.

In U.S. corporate news:

• General Electric (GE 21.97, -1.61): -6.8% after missing earnings estimates and issuing disappointing earnings guidance for fiscal year 2017.
• Procter & Gamble (PG 90.39, -1.20): -1.3% despite reporting better-than-expected earnings.
• PayPal (PYPL 70.22, +2.97): +4.4% after beating both top and bottom line estimates and issuing upbeat revenue guidance for the fourth quarter.
• Celgene (CELG 127.85, -8.11): -6.0% after announcing that it will stop developing its Crohn's disease drug mongersen.

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended the week on a higher note with Japan's Nikkei settling just above its flat line to record its 14th consecutive advance. Japan's Nikkei unch, Hong Kong's Hang Seng +1.2%, China's Shanghai Composite +0.3%. India's Sensex was closed for Diwali-Balipratipada.
  • In economic data:
    • South Korea's September PPI +0.3% month-over-month (last 0.3%); +3.2% year-over-year (last 3.2%)
    • New Zealand's September External Migration & Visitors +3.1% (last 5.8%). Visitor Arrivals +0.3% month-over-month (last -0.4%) and Credit Card Spending +4.9% year-over-year (last 6.4%)
  • In news:
    • China's Ministry of Finance ordered ten banks to meet on October 25 to discuss the proposed offering of unrated dollar-denominated 5- and 10-yr notes.
    • Japan's Finance Minister Taro Aso said that internal reserves of Japanese companies have grown too large and should be used for investments and wages.
    • Reports in Chinese press indicated that Shanghai is planning to open a free-trade port.

• Major European indices trade on a modestly higher note while Italy's MIB (+0.8%) outperforms. France's CAC +0.2%, UK's FTSE +0.3%, Germany's DAX +0.3%.
  • In economic data:
    • Eurozone Current Account surplus EUR33.30 billion (expected surplus of EUR26.20 billion; last surplus of EUR31.50 billion)
    • Germany's September PPI +0.3% month-over-month (expected 0.1%; last 0.2%); +3.1% year-over-year (consensus 2.9%; last 2.6%)
    • UK's September Public Sector Net Borrowing GBP5.33 billion (expected GBP5.70 billion; last GBP4.14 billion)
  • In news:
    • German Chancellor Angela Merkel said she wants to secure a Brexit deal with Britain, but claimed that British Prime Minister May's Brexit stance is 'insufficient' at this juncture. UK's Brexit minister David Davis reportedly warned officials that plans should be in place for how to proceed in case the two sides are unable to reach a deal.
    • European Council President Donald Tusk said that there is no doubt that the situation in Spain is concerning, but there is no place for EU mediation or international action in Spain.