Day Traders Diary

1/16/18

Stocks rocketed to new records early on Tuesday, but ran out of gas soon thereafter as the new year rally showed signs of fatigue. The major stock indices finished lower across the board.

The S&P 500 and the Nasdaq Composite lost 0.4% and 0.5%, respectively, while the small-cap Russell 2000 tumbled 1.2%. The Dow Jones Industrial Average showed relative strength, ending just a tick below its unchanged mark. At their session highs, the major averages held gains between 0.8% and 1.1%.

Eight of eleven sectors finished Tuesday in negative territory with the materials (-1.2%) and energy (-1.2%) groups pacing the retreat. Energy shares sold off amid a decrease in the price of crude oil, which slipped from a three-year high; West Texas Intermediate crude futures declined 0.7% to $63.86 per barrel.

The industrial sector (-0.9%) also showed relative weakness with its second largest component by market cap--General Electric (GE 18.21, -0.55)--losing 2.9%. GE tumbled after announcing that it will take a larger-than-expected charge of $6.2 billion from its legacy reinsurance business. In addition, reports indicate the company is considering a major breakup.

Most other sectors finished with losses between 0.3% and 0.7%, including the heavily-weighted financial sector (-0.3%). However, within the financial space, Citigroup (C 77.11, +0.27) climbed 0.4% after reporting better-than-expected earnings for the fourth quarter.

On the flip side, the heavily-weighted health care sector (+0.5%) finished in the green, thanks in large part to Merck (MRK 62.07, +3.41), which climbed 5.8% after announcing that its drug Keytruda was successful in combination with two chemotherapy drugs as a first line treatment for lung cancer. UnitedHealth (UNH 232.90, +4.26) also advanced, adding 1.9%, after beating earnings estimates and raising its guidance for 2018 due to the tax overhaul.

The consumer staples sector (+0.4%) also finished in the green, as did the lightly-weighted real estate space (+0.5%).

In the bond market, U.S. Treasuries finished mixed in a curve-flattening trade. The yield on the benchmark 10-yr Treasury note slipped one basis point to 2.54% while the 2-yr yield climbed one basis point to 2.01%. Yields move inversely to prices.

Elsewhere, equity indices in the Asia-Pacific region finished Tuesday mostly higher. Japan's Nikkei climbed 1.0%, closing at a fresh 26-year high, while Hong Kong's Hang Seng rallied 1.8%, bouncing back from Monday's decline--which broke a 14-session winning streak.

The major European bourses settled mixed. The UK's FTSE shed 0.2% while France's CAC and Germany's DAX added 0.1% and 0.4%, respectively.

Reviewing Tuesday's economic data, which was limited to the Empire State Manufacturing Index for January:

• The Empire Manufacturing Survey for January declined to 17.7 (Briefing.com consensus 19.0) from the prior month's revised reading of 19.6 (from 18.0).

On Wednesday, investors will receive a slew of economic reports, including the weekly MBA Mortgage Applications Index at 7:00 AM ET, Industrial Production (Briefing.com consensus +0.4%) and Capacity Utilization (Briefing.com consensus 77.3%) for December at 9:15 AM ET, the NAHB Housing Market Index (Briefing.com consensus 73) at 10:00 AM ET, the Fed's Beige Book at 2:00 PM ET, and Net Long-Term TIC Flows for January at 4:00 PM ET.

In addition, Bank of America (BAC 31.24, +0.05), Goldman Sachs (GS 258.46, +1.43), U.S. Bancorp (USB 57.17, +0.19), and Charles Schwab (SCHW 55.53, +0.14) will report earnings before the opening bell.

• Nasdaq Composite: +4.6% YTD
• Dow Jones Industrial Average: +4.3% YTD
• S&P 500: +3.9% YTD
• Russell 2000: +2.4% YTD