Day Traders Diary



Stocks rallied on Friday, turning what was a disappointing week into a modest success. The Nasdaq Composite led the charge, adding 1.8%, while the S&P 500 and the Dow Jones Industrial Average climbed 1.6% and 1.4%, respectively. For the week, the three major averages finished with gains between 0.4% and 1.4%.

After trending sideways through the first hour of trading, the major averages began building on their opening gains, which were around 0.5% apiece, and nearly doubled them by midday. The rally then paused for about two hours as the S&P 500 wrestled with its 50-day simple moving average (2731), which proved to be an area of resistance on Thursday. The benchmark index eventually jumped above the key technical level and continued climbing--alongside the Dow and the Nasdaq--until the closing bell.

Friday's rally was broad, with 11 of 11 S&P 500 sectors finishing in positive territory.

The rate-sensitive utilities sector was the top-performing group, adding 2.7%, as Treasury yields slipped across the curve; the yield on the 2-yr note declined two basis points to 2.24%, while the yield on the benchmark 10-yr note tumbled five basis points to 2.87%. The top-weighted technology group (+2.2%) and the energy group (+2.2%) also outperformed on Friday.

Within the tech space, Hewlett Packard Enterprise (HPE 18.14, +1.73) and HP (HPQ 22.13, +0.74) rallied 10.5% and 3.5%, respectively, after the companies beat both earnings and revenue estimates, in addition to issuing upbeat profit guidance. HPE shares finished at a fresh all-time high.

As for energy, its outperformance was helped by an increase in the price of crude oil; WTI crude futures jumped 1.3% to $63.56/bbl, hitting a two-week high.

On the downside, the industrial sector (+0.8%) underperformed as Dow components Boeing (BA 356.66, +0.74), General Electric (GE 14.49, -0.01), and 3M (MMM 237.02, +1.02) finished the session little changed. The lightly-weighted telecom services sector (+0.8%) also struggled to keep pace with the broader market.

In corporate news, Nordstrom (JWN 53.56, +3.29) rallied 6.5% following reports that the Nordstrom family hopes to seal a deal to take the high-end retailer private before next Thursday, when the company is due to report its results for the fourth quarter. Meanwhile, General Mills (GIS 52.98, -1.97) declined 3.6% after agreeing to acquire Blue Buffalo (BUFF 40.00, +5.88) for $40 per share in cash.

Investors did not receive any economic data on Friday, but the Fed did release its Monetary Policy Report, which is expected to be a blueprint for new Fed Chair Jerome Powell's testimony before Congress next week. The Fed stayed on message in the report, calling for a path of gradual rate hikes and noting that it expects inflation to creep closer to the 2.0% year-over-year target as economic activity continues to expand at a moderate pace.

On Monday, investors will receive just one economic report, New Home Sales for January ( consensus 645K), which will be released at 8:30 AM ET.

  • Nasdaq Composite: +6.3% YTD
  • S&P 500: +2.8% YTD
  • Dow Jones Industrial Average: +2.4% YTD
  • Russell 2000: +0.9% YTD

Week In Review: Eking Out a Last-Minute Win

Equities advanced this week thanks to a last-minute rally on Friday that reclaimed losses registered on Tuesday and Wednesday. The S&P 500 and the Dow Jones Industrial Average added around 0.5% apiece, while the tech-heavy Nasdaq Composite outperformed, jumping 1.4%. Markets were closed on Monday (February 19) in celebration of Presidents' Day.

The Wednesday release of the minutes from the January FOMC meeting was perhaps the most notable event of an otherwise relatively quiet week. The minutes were somewhat outdated considering the last FOMC meeting took place before a host of events that may have altered the Fed's perspective a bit, including the release of the CPI and PPI reports for January, the passing of a two-year budget deal in Congress that will increase spending by approximately $420 billion, and a sharp sell off on Wall Street.

Nonetheless, the minutes did reveal that almost all FOMC members expect inflation to increase in 2018 and that a majority of members believe a stronger outlook for economic growth raises the "likelihood that further gradual policy firming would be appropriate."

The yield on the benchmark 10-yr Treasury note ticked up to a four-year high on Wednesday following the minutes, closing at 2.94%, but slipped back to 2.87% by Friday's close--finishing flat for the week. Meanwhile, the 2-yr yield jumped to 2.26% following the minutes, its highest level since September 2008, but finished Friday at 2.24%--locking in a weekly gain of five basis points. In addition to the minutes, the 2-yr yield was also bolstered by a relatively weak 2-yr note auction on Tuesday.

In corporate news, shares of Wal-Mart (WMT) tumbled 10.2% on Tuesday after the world's largest retailer reported lower-than-expected earnings for the fourth quarter and issued disappointing profit guidance for fiscal year 2019. Conversely, Hewlett Packard Enterprise (HPE) rallied 10.5% to a new all-time high on Friday after reporting better-than-expected earnings and revenues and issuing upbeat profit guidance. HPE also announced a plan to return $7 billion to shareholders via share repurchases and a dividend increase.

As for the sector standings, seven of eleven S&P 500 groups finished the week in positive territory. The technology (+1.9%), materials (+1.3%), and energy (+1.0%) groups finished at the top of the leaderboard, while the consumer staples (-2.3%) and utilities (-2.4%) sectors finished at the bottom.

The S&P 500's 50-day simple moving average (2731) proved to be an area of resistance for the benchmark index on several occasions this week, the most notable of which was on Thursday when the S&P 500 retraced the entirety of a 1.2% intraday gain after hitting the key technical level. However, the S&P 500 finally managed to climb above its 50-day simple moving average on Friday, which helped fuel further buying to bring the index into positive territory for the week.

Following this week's trading, the S&P 500 is down 4.4% from the record high it hit on January 26.

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