Day Traders Diary



Stocks slipped on Tuesday, retracing all of Monday's slim gains, as investors continued to digest the prospect of tax reform--which has been a stumbling block for the market as of late. The major stock indices modestly added to, and trimmed, their opening losses throughout the day, eventually settling near the top of their trading ranges.

The tech-heavy Nasdaq dropped 0.3%, while the S&P 500 and the Dow lost 0.2% and 0.1%, respectively.

Energy shares showed particular weakness as the price of crude oil continued to retreat from the two-year high it touched at the beginning of the prior week. West Texas Intermediate crude futures declined by 1.9%, settling at a price of $55.70 per barrel. The S&P 500's energy sector finished lower by 1.5%.

The materials (-1.1%) and telecom services (-1.4%) groups also finished with sizable losses, but most other sectors closed roughly in line with, or above, the broader market. The health care space (-0.4%) faced slightly heavier selling as biotechnology shares slipped to a three-month low; the iShares Nasdaq Biotechnology ETF (IBB 305.05, -5.03) lost 1.6%.

Meanwhile, industrial giant General Electric (GE 17.90, -1.12) tumbled another 5.9% following Monday's decision to slash its dividend by 50%.

However, there were a handful of groups that managed to move higher on Tuesday, including the utilities space, which added 1.2%. The rate-sensitive group benefited from increased buying in the Treasury market, which sent yields lower across the curve. The benchmark 10-yr yield dropped two basis points to 2.38%.

The consumer staples (+0.3%) and consumer discretionary (+0.1%) spaces also showed relative strength. Within the consumer discretionary group, Home Depot (HD 168.06, +2.71) climbed 1.6% after reporting better-than-expected earnings and revenues for the third quarter and raising its guidance for 2018. 

Advance Auto (AAP 95.72, +13.44) and TJX (TJX 67.94, -2.82) also reported earnings on Tuesday--with mixed results. TJX shares slipped 4.0% after the apparel and home goods retailer missed sales estimates for the third quarter, while Advance Auto shares surged 16.3% after the auto parts retailer beat Q3 profit estimates and reaffirmed its same store sales guidance for fiscal year 2017.

In other corporate news, Buffalo Wild Wings (BWLD 145.35, +28.10) jumped 24.0% following reports that private equity firm Roark Capital has made a bid to buy the casual dining and sports bar franchise for more than $150 per share.

From Washington, unconfirmed reports indicate that Senate leaders have decided to add a repeal of the Affordable Care Act's individual mandate to the upper chamber's version of a tax reform bill. If true, this development may slow tax reform negotiations. On a related note, the House is expected to vote on its version of the bill this Thursday.

Elsewhere, equity indices in the Asia-Pacific region ended Tuesday on a mostly lower note, with Japan's Nikkei (unch) showing relative strength. The Euro Stoxx 50 (-0.5%) moved lower for the seventh session in a row as the euro climbed 1.1% against the U.S. dollar to 1.1794--its highest level in nearly three weeks.

Reviewing Tuesday's economic data, which was limited to the October Producer Price Index and the October NFIB Small Business Optimism Index:

  • Producer prices rose 0.4% in October ( consensus +0.1%), while core producer prices also rose 0.4% ( consensus +0.2%). Year over year, producer prices are up 2.8% and core producer prices have risen 2.4%.
    • The key takeaway from the report is that it will create some angst about possible pass-through effects on consumer prices and will help solidify expectations for a December rate hike from the Federal Reserve.
  • The NFIB Small Business Optimism Index increased to 103.8 in October from 103.0 in the September reading.

On Wednesday, investors will receive the weekly MBA Mortgage Applications Index at 7:00 ET, the Consumer Price Index for October ( consensus +0.1%) at 8:30 ET, Retail Sales for October ( consensus +0.1%) at 8:30 ET, November Empire Manufacturing ( consensus 26.0) at 8:30 ET, and September Business Inventories ( consensus 0.0%) at 10:00 ET.

  • Nasdaq Composite +25.2% YTD
  • Dow Jones Industrial Average +18.5% YTD
  • S&P 500 +15.2% YTD
  • Russell 2000 +8.4% 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.