Day Traders Diary

12/18/17

Investors pushed U.S. equities to new record highs on Monday, excited by the promising outlook for the GOP's tax reform bill.

The Nasdaq Composite (+0.8%), the Dow Jones Industrial Average (+0.6%), and the S&P 500 (+0.5%) each settled at new all-time highs. However, modest selling in the afternoon left the indices a step below their best marks of the day. The Russell 2000 (+1.2%) paced Monday's rally and, like its peers, finished at a new record high.

Republicans appear set to pass their tax overhaul bill in the next few days after securing the support of Senators Marco Rubio (R-FL) and Bob Corker (R-TN) on Friday. The bill, which calls for reducing the corporate tax rate to 21% from 35% in 2018, was unveiled on Friday evening and can undergo no further changes due to procedural rules.

The bill's chances of passage looked even better late Monday afternoon when CNBC reported that Senator Mike Lee (R-UT) has decided to vote in favor of the bill. If all goes according to plan, President Trump should secure his first major legislative victory by the end of the week.

Eight of eleven sectors finished Monday in the green, and, in general, cyclical sectors outperformed their countercyclical peers. The lightly-weighted materials space (+1.5%) was the top-performing group, helped by DowDuPont's (DWDP 71.39, +1.39) advance of 2.0%, while no other sector added more than 1.0%.

Within the top-weighted technology space (+0.8%), chipmakers showed relative strength, sending the PHLX Semiconductor Index higher by 2.2%. Retailers also had a positive showing on Monday, helping to boost the consumer discretionary space (+0.8%); the SPDR S&P Retail ETF (XRT 45.46, +1.18) climbed 2.7%.

The Dow Jones Transportation Average advanced 1.2% to a new all-time high, but the industrial sector (+0.7%) finished just a tick ahead of the broader market.

On the downside, the utilities sector (-1.2%) had a rough outing, extending its month-to-date loss to 3.2%. The group has struggled in recent weeks amid concerns about wildfires in Southern California. The consumer staples space (-0.1%) and the health care group (unch) also finished Monday in the red.

In corporate news, Amplify Snack Brands (BETR 12.01, +5.01), which makes the Skinny Pop brand, surged 71.6% after agreeing to be acquired by Hershey (HSY 114.26, +0.12) for $12.00 per share in cash. HSY shares finished the session with a slim gain of 0.1%.

U.S. Treasuries ended Monday mixed, with shorter-dated issues showing relative strength. The yield on the 2-yr Treasury note slipped one basis point to 1.83%, while the benchmark 10-yr yield climbed three basis points to 2.39%. Yields move inversely to prices.

Elsewhere, equity indices in the Asia-Pacific region ended Monday in positive territory, with Japan's Nikkei (+1.6%) showing particular strength, while the Euro Stoxx 50 jumped 1.4%. The U.S. Dollar Index declined 0.2% to 93.24, with the greenback losing 0.3% against the euro (1.1781) and 0.5% against the pound (1.3382).

Reviewing Monday's economic data, which was limited to the NAHB Housing Market Index for December:

• The NAHB Housing Market Index for December rose to 74 (Briefing.com consensus 70) from a revised reading of 69 in November (from 70).

On Tuesday, investors will receive three pieces of data--November Housing Starts (Briefing.com consensus 1259K), November Building Permits (Briefing.com consensus 1280K), and the Current Account Balance for the third quarter (Briefing.com consensus -$117.4 billion)--all of which will be released at 8:30 ET.

• Nasdaq Composite +29.9% YTD
• Dow Jones Industrial Average +25.5% YTD
• S&P 500 +20.2% YTD
• Russell 2000 +14.1% YTD