Day Traders Diary

4/2/18

U.S. equities registered big losses on Monday, with declining issues outpacing advancing issues four to one at the New York Stock Exchange.

The S&P 500 dropped 58.99 points, or 2.2%, to 2581.88, falling to its lowest level since mid-November and closing below its 200-day simple moving average (2589.85) for the first time since June 2016. The Dow Jones Industrial Average tumbled 458.92 points, or 1.9%, to 23644.19, and the Nasdaq Composite slid 193.76 points, or 2.7%, to 6870.12, rejoining the other two major indices in negative territory for the year. A late rally brought the major averages up from their worst marks of the day -- the S&P 500 was down 3.3% at its session low.

Losses were both broad -- 11 of 11 S&P 500 sectors finished in the red -- and deep -- 8 of 11 groups lost at least 2.0%.

The consumer discretionary sector (-2.8%) was the weakest group, weighed down by a 5.2% decline in shares of Amazon (AMZN 1371.99, 75.35), which dropped after President Trump promised to intervene in the company's relationship with the U.S. Post Office, which he says is losing "a fortune" by delivering Amazon packages. The president's statement was in line with similar comments that he made last week. Meanwhile, the lightly-weighted utilities group (-0.8%) showed relative strength, closing at the top of the leaderboard.

There were a handful of headline catalysts behind Monday's mauling -- including renewed trade concerns following China's decision to follow through with tariffs on 128 products imported from the U.S. and political angst following President Trump's threat to withdraw from NAFTA if Mexico doesn't do more to secure the border -- but technical and psychological factors were also at play; the S&P 500 wiped out its 200-day simple moving average, which has been a key area of technical support, and the continued underperformance of the influential technology sector weighed on investor sentiment.

The technology space declined 2.5%, with Dow component Intel (INTC 48.92, -3.16) showing particular weakness. Intel shares dropped 6.1% in reaction to reports that Apple (AAPL 166.68, -1.10) is planning to use its own processors, instead of Intel chips, in Mac computers starting as early as 2020. Apple outperformed the broader market, losing 0.7%, while fellow mega caps Facebook (FB 155.39, -4.40), Alphabet (GOOG 1006.47, -25.32), and Microsoft (MSFT 88.52, -2.75) lost between 2.5% and 3.0%.

Despite the broad retreat, there were a few names that moved higher on Monday, including Humana (HUM 280.70, +11.87), which rallied 4.4% after a Wall Street Journal report that Walmart (WMT 85.55, -3.42) is in preliminary talks to acquire the health insurance company. Dow component UnitedHealth (UNH 217.20, +3.20) advanced 1.5% in sympathy, but the health care sector settled just a tick above the broader market, finishing with a loss of 2.1%.

Outside of equities, U.S. Treasuries ticked higher, pushing yields lower across the curve; the benchmark 10-yr yield declined one basis point to 2.73% -- its lowest level since early February. Meanwhile, West Texas Intermediate crude futures dropped 2.6% to $63.08 per barrel, gold futures advanced 1.6% to $1348.10/oz, and the CBOE Volatility Index (VIX) jumped 3.5 points, or 17.1%, to 23.37.

Markets were closed in Europe for Easter Monday, while the major stock indices in Asia opened the week on a modestly lower note.

Reviewing Monday's economic data, which was limited to the ISM Index for March and the Construction Spending report for February:

• The ISM Index for March declined to 59.3 from an unrevised reading of 60.8 in February, while the Briefing.com consensus expected a reading of 60.0.
  • The key takeaway from the report is that the Prices Index hit its highest level (78.1) since April 2011, with price increases registered across 17 of 18 industry sectors.
• Construction Spending ticked up 0.1% in February, while the Briefing.com consensus expected an increase of 0.5%. The prior month's reading was left at 0.0%.
  • The key takeaway from the report is that construction spending growth continues to run at a relatively slow pace, which is an inhibitor of stronger overall growth.

On Tuesday, March auto and truck sales will be released throughout the day.

• Nasdaq Composite: -0.5% YTD
• S&P 500: -3.4% YTD
• Dow Jones Industrial Average: -4.4% YTD
• Russell 2000: -2.8% YTD

Headlines provided by Briefing.com