Day Traders Diary

12/6/17

The major stock indices have been weak in recent sessions, retreating from the record highs they posted last week, as investors dial back their technology holdings at the tail end of what has been an incredible year for the tech sector thus far. The tech group attempted to bounce back on Tuesday, but finished with just a modest gain.

Things are looking much the same this morning as the S&P 500 futures trade three points, or 0.1%, below fair value, and the tech-heavy Nasdaq futures show relative weakness (-0.3%). The Nasdaq has lost 1.3% this week, more than double the S&P 500's decline (-0.5%).

Elsewhere, equity markets in Asia finished Wednesday in the red, with Japan's Nikkei (-2.0%) and Hong Kong's Hang Seng (-2.1%) pacing the retreat. The Euro Stoxx 50 is down 0.8%, however, the UK's FTSE has managed to add 0.2% as Brexit divorce negotiations continue.

In the bond market, U.S. Treasuries are rallying this morning, sending yields lower across the curve. The yield on the benchmark 10-yr Treasury note is down two basis points at 2.33%, while the 2-yr yield is down four basis points at 1.79%.

Meanwhile, West Texas Intermediate crude futures are down 1.4% at $56.79 per barrel, which marks a two-week low. The American Petroleum Institute reported that U.S. crude stockpiles declined by 5.5 million barrels last week, but the official government figures will be released this morning at 10:30 ET.

On the data front, investors will receive the ADP Employment Change Report for November (Briefing.com consensus 190K) at 8:15 ET and the revised readings for third quarter Productivity (Briefing.com consensus +3.3%) and Unit Labor Costs (Briefing.com consensus +0.2%) at 8:30 ET.

The ADP reading is seen as a prelude to Friday's Employment Situation Report (Briefing.com consensus 190K), although the two often deviate sharply.

In U.S. corporate news:

• Home Depot (HD 178.95, -3.90): -2.1% despite reaffirming its guidance for 2018 and announcing a $15 billion share repurchase program.
• Dave & Busters (PLAY 57.43, +4.54): +8.6% after reporting above-consensus earnings and introducing a smaller store format.
• Fred's (FRED 4.48, -0.61): -12.0% after missing both profit and sales estimates and canceling its dividend. 

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended the midweek session on a mostly lower note. Japan's Nikkei -2.0%, Hong Kong's Hang Seng -2.1%, China's Shanghai Composite -0.3%, India's Sensex -0.6%.
  • In economic data:
    • Australia's Q3 GDP +0.6% quarter-over-quarter (expected 0.7%; last 0.9%); +2.8% year-over-year (consensus 3.0%; last 1.8%)
  • In news:
    • Overall investor sentiment appeared to be dampened by a widely-shared article in the official state-run newspaper in China's Jilin city, which advised readers on ways of protecting themselves in the event of a nuclear attack or explosion.
    • Shipping names were under pressure after South Korea's Samsung Heavy Industries (-28.9%) issued a profit warning.
    • New Bank of Japan member Takako Masai said it is essential to show determination to create stable prices and that downside risks to prices are big.
    • Moody's noted that it does not expect the People's Bank of China to change its policy in 2018.
    • The Reserve Bank of India kept its repurchase rate unchanged at 6.00%, as expected.

• Major European indices trade on a mostly lower note, but the UK's FTSE (+0.2%) outperforms. France's CAC -0.5%, Germany's DAX -1.0%.
  • In economic data:
    • Eurozone Retail PMI 52.4 (last 51.1)
    • Germany's October Factory Orders +0.5% month-over-month (expected -0.3%; last 1.2%)
    • Swiss November CPI -0.1% month-over-month (expected 0.2%; last 0.1%); +0.8% year-over-year (consensus 0.9%; last 0.7%)
  • In news:
    • A Brexit deal remains elusive with the latest reports indicating the DUP, which is part of the ruling coalition in the UK, is not willing to support the deal in its current form. UK's Foreign Secretary Boris Johnson and Environment Secretary Michael Gove expressed concerns over Prime Minister Theresa May's plan to keep UK regulations aligned with those of the EU after Brexit.
    • Greek Prime Minister Alexis Tsipras said Greece will leave the bailout program in 2018 due to the ability to reach a staff-level agreement with creditors without needing to raise new funds.