Day Traders Diary

12/19/17

• U.S. equities slipped from record highs on Tuesday as investors cautiously awaited the Senate's vote on tax reform. The major indices held modest losses throughout most of the session, and a late wave of selling left them near their session lows. The Dow Jones Industrial Average lost 0.2%, the S&P 500 declined by 0.3%, and the tech-heavy Nasdaq dropped 0.4%. Small caps underperformed, sending the Russell 2000 lower by 0.8%. Tuesday's main event was the House's vote on tax reform, which took place at around 2:30 PM ET. The House passed the GOP's bill, as expected, in a party-line vote. The bill will now go to the Senate, where it will have a more narrow path to passage as the GOP has just a two-vote majority in the upper house. Still, the measure is expected to pass. The Senate began the ten hours of required debate on the bill shortly before the closing bell, putting a final vote on track for early Wednesday morning. Most sectors finished Tuesday in negative territory, a reverse of Monday's session. The utilities (-1.8%) and real estate (-1.9%) groups paced the retreat, but it was the top-weighted technology space (-0.5%) that had the most bearish impact on the broader market. Tech shares were broadly weak, but Apple (AAPL 174.54, -1.88) showed particular weakness after Nomura downgraded the tech giant's shares to 'Neutral' from 'Buy' on Tuesday morning; AAPL shares ended the day lower by 1.1%. Chipmakers outperformed their tech peers, but still pulled the PHLX Semiconductor Index lower by 0.1%. On the upside, the consumer staples sector (+0.2%) bounced back from a relatively poor outing on Monday. The group's largest component by market cap--Wal-Mart (WMT 98.80, +0.90)--was among the top performers, adding 0.9%, after Citigroup upgraded WMT shares to 'Buy' from 'Neutral.' Corporate news was pretty light on Tuesday, but it's worth pointing out that Darden Restaurants (DRI 96.69, +6.15)--the owner of chains like Olive Garden and LongHorn Steakhouse--jumped 6.8% after reporting better-than-expected earnings and revenues for its fiscal second quarter. The company also raised its guidance for 2018. In the bond market, U.S. Treasuries sold off on Tuesday, with longer-dated issues showing relative weakness. The yield on the 2-yr Treasury note climbed three basis points to 1.86%, while the benchmark 10-yr yield jumped seven basis points to 2.46%--its best level in two months. The 2yr-10yr spread hit a fresh December high (60 bps). Elsewhere, equity indices in the Asia-Pacific region finished Tuesday mostly higher, while the major European bourses ended on a mostly lower note. Japan's Nikkei (-0.2%) exhibited relative weakness in Asia and the UK's FTSE (+0.1%) outperformed its peers across the pond. Reviewing Tuesday's economic data, which included November Housing Starts, November Building Permits, and the Current Account Balance for the third quarter: Housing starts increased to a seasonally adjusted annualized rate of 1.297 million units in November (Briefing.com consensus 1.259 million), up from a revised 1.256 million units in October (from 1.290 million). Building permits decreased to a seasonally adjusted 1.298 million in November (Briefing.com consensus 1.280 million) from a revised 1.316 million in October (from 1.297 million). The key takeaway from the report is that there was a 1.4% increase in permits for single-family homes and a 5.3% increase in single-family starts, as that is where supply growth is greatly needed to meet home buyer demand. The current account deficit for the third quarter totaled $100.6 billion (Briefing.com consensus -$117.4 billion). The second quarter deficit was revised to $124.4 billion from $123.1 billion. On Wednesday, investors will receive the weekly MBA Mortgage Applications Index and November Existing Home Sales (Briefing.com consensus 5.56 million). The two reports will be released at 7:00 ET and 10:00 ET, respectively. Nasdaq Composite +29.4% YTD Dow Jones Industrial Average +25.3% YTD S&P 500 +19.8% YTD Russell 2000 +13.2% YTD

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