Day Traders Diary

12/12/17

The U.S. equity market had another positive showing on Tuesday, with the S&P 500 and the Dow Jones Industrial Average closing at fresh record highs for the third session in a row.

Tuesday's session was, like Monday's, relatively quiet as investors continued to await the Fed's latest policy directive, which will cross the wires on Wednesday afternoon. The S&P 500 advanced 0.2% with seven of its eleven sectors finishing in positive territory. The Dow did modestly better, adding 0.5%, while the tech-heavy Nasdaq finished with a loss of 0.2%.

The heavily-weighted financial sector climbed 1.0% on Tuesday, extending its December gain to 2.5%--which is more than four times the S&P 500's month-to-date gain of 0.6%. Within the group, Dow component Goldman Sachs (GS 257.68, +7.55) was among the strongest names (+3.0%), helping the Dow Jones Industrial Average outpace its peers.

Finishing at the very top of the sector standings--just one step above the financial group--was the telecom services sector, which rallied 2.8%. Wireless giants AT&T (T 38.10, +1.20) and Verizon (VZ 53.19, +1.35) finished with respective gains of 3.3% and 2.6%. VZ shares were upgraded to 'Buy' at Nomura before the opening bell.

As for the other advancing sectors, none finished with a gain of more than 0.4%.

On the downside, the top-weighted technology sector (-0.3%) settled in negative territory, breaking a five-session winning streak. Chipmakers were particularly weak, evidenced by the 1.0% decrease in the PHLX Semiconductor Index, as was social media giant Facebook (FB 176.96, -2.08), which dropped 1.2%.

In corporate news, Dow component Boeing (BA 289.94, +6.78) announced a 20% increase in its quarterly dividend and a new $18 billion share repurchase program. The news sent the aerospace giant to a new all-time high (+2.4%) and helped fuel the Dow's relatively strong performance.

U.S. Treasuries ended the day mostly lower, but shorter-dated issues managed to eke out slim gains. The 2-yr yield slipped one basis point to 1.81%, while the benchmark 10-yr yield climbed two basis points to 2.40%. The three basis point increase in the 2yr-10yr spread helped fuel the financial sector's positive performance.

Elsewhere, equity indices in the Asia-Pacific region finished Tuesday on a lower note, with China's Shanghai Composite (-1.3%) pacing the retreat, while the Euro Stoxx 50 advanced for the third time in four sessions, adding 0.4%.

Reviewing Tuesday's economic data, which included the November Producer Price Index and the November Treasury Budget:

• Producer prices rose 0.4% in November (Briefing.com consensus +0.4%), while core producer prices increased 0.3% (Briefing.com consensus +0.2%). Year-over-year, producer prices are up 3.1% and core producer prices have risen 2.4%.
  • The key takeaway from the PPI report is that producer prices are rising and will create some profit margin pressures if the higher prices are not passed through to consumers.
• The Treasury Budget for November showed a deficit of $138.5 billion (Briefing.com consensus -$134.0 billion) versus a deficit of $136.7 billion for November 2016.
  • The Treasury Budget data is not seasonally adjusted, so the November deficit cannot be compared to the $63.2 billion deficit registered in October.

On Wednesday, investors will receive the weekly MBA Mortgage Applications Index at 7:00 ET and the November Consumer Price Index (Briefing.com consensus +0.4%) at 8:30 ET. The Fed will release its latest policy directive at 14:00 ET.