Day Traders Diary



U.S. equities opened the abbreviated week on a lower note, with the S&P 500 and the Dow Jones Industrial Average breaking their six-session winning streaks. The two indices lost 0.6% and 1.0%, respectively, while the tech-heavy Nasdaq Composite managed to escape with a relatively modest loss of 0.1%. The Russell 2000 declined 0.9%.

Trading was choppy for much of the day as the S&P 500 wrestled with its 50-day simple moving average (2726.82). The benchmark index opened with a loss of 0.3% before rallying to a gain of 0.2% around midday, but selling in the late afternoon took the index back into the red; at its lowest mark of the day, the S&P 500 was down 0.9%.

Several factors contributed to Tuesday's decline:

  • A sharp drop in shares of Dow component Wal-Mart (WMT 94.11, -10.67, -10.2%), which disappointed investors with weaker-than-expected fourth quarter results and an FY19 earnings per share outlook that trailed analysts' average expectation
  • A relatively weak 2-yr note auction, which fostered concerns about increased supply and the specter of rising rates accompanying the added supply
    • The 2-yr note yield climbed three basis points to 2.22%; the 10-yr note yield ticked up one basis point to 2.89%
  • A general sense that the stock market was vulnerable to some renewed selling interest after rallying in an unabashed manner last week on the heels of its biggest decline in two years
  • A breaching of the S&P 500's 50-day simple moving average, which provided the index with support on Thursday and Friday

10 of 11 S&P 500 sectors finished Tuesday in the red, with the consumer staples sector (-2.3%) leading the retreat following Wal-Mart's disappointing earnings. The utilities (-1.3%), telecom services (-1.7%), health care (-1.1%), industrials (-1.0%), and real estate (-1.0%) sectors also finished with losses of at least 1.0%.

On the flip side, the top-weighted technology sector (+0.3%) was the strongest group, with chipmakers exhibiting particular strength; the PHLX Semiconductor Index advanced 1.8%. Within the tech sector, Qualcomm (QCOM 63.99, -0.86, -1.3%) decided to increase its bid for NXP Semiconductors (NXPI 125.56, +7.06, +6.0%) to $127.50 per share from $110.00 per share in an attempt to fend off a competing offer from rival Broadcom (AVGO 249.62, +0.73, +0.3%).

In other corporate news, Dow component Home Depot (HD 186.71, -0.26, -0.1%) reported better-than-expected earnings for the fourth quarter, and privately-held Albertsons announced it will be purchasing the remaining portion of Rite Aid (RAD 2.20, +0.07, +3.3%)--the portion that isn't already being acquired by Walgreens Boots Alliance (WBA 70.91, -0.01, 0.0%)--to form a new publicly traded company.

Elsewhere, Japan's Nikkei (-1.0%) paced a broad retreat in Asia on Tuesday, while Germany's DAX (+0.8%) led most equity markets higher in Europe--although the UK's FTSE (unch) underperformed. Markets in China remained closed for the Lunar New Year.

Investors didn't receive any economic data on Tuesday. However, on Wednesday, they will receive several reports, including the weekly MBA Mortgage Applications Index at 7:00 AM ET, Existing Home Sales for January ( consensus 5.62 million) at 10:00 AM ET, and the minutes from the January FOMC meeting at 2:00 PM ET.

  • Nasdaq Composite: +4.8% YTD
  • S&P 500: +1.6% YTD
  • Dow Jones Industrial Average: +1.0% YTD
  • Russell 2000: -0.4% YTD

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