Day Traders Diary



Stocks climbed for the second straight session on Tuesday, as investors turned their attention from geopolitical tensions to Q1 corporate earnings -- which have been largely upbeat thus far. The tech-heavy Nasdaq Composite was particularly strong, adding 1.7%, while the S&P 500 and the Dow finished with respective gains of 1.1% and 0.9%.

All three major indices closed above their 50-day moving averages -- which none of them had done since March 21 or earlier.

Big earnings names included Netflix (NFLX 336.06, +28.28), Goldman Sachs (GS 253.63, -4.25), Johnson & Johnson (JNJ 130.54, -1.22), and UnitedHealth (UNH 238.55, +8.23), all of which reported better-than-expected first quarter profits. Shares of Netflix soared 9.2% -- hitting a new all-time high -- after the streaming media giant crushed its subscriber growth estimates (+7.4 million actual vs +6.5 million estimates) and raised its guidance for Q2. UnitedHealth shares also advanced, adding 3.6%, while shares of Johnson & Johnson and Goldman Sachs declined 0.9% and 1.7%, respectively.

Goldman Sachs' performance was particular disheartening considering the company soundly beat both profit and revenue estimates for the first quarter. Financial giants JPMorgan Chase (JPM 110.21, 0.00), Wells Fargo (WFC 50.57, -0.23), Citigroup (C 69.74, -0.33), and Bank of America (BAC 30.04, +0.11) performed in a similar manner following their recent earnings beats, leaving some investors scratching their heads and others questioning the conviction behind of this recent equity rebound. The financial sector -- which typically holds a leadership position in broader market moves --  finished Tuesday at the bottom of the sector standings with a loss of 0.1%.

In addition to Goldman, another curve-flattening trade in the U.S. Treasury market weighed on the financial group. The yield on the benchmark 10-yr yield slid two basis points to 2.81%, while the yield on the 2-yr note climbed two basis points to 2.39%, cutting the 2s10s spread to 42 basis points. That's the lowest the 2s10s spread -- which points to the difference between what banks make on loans and what they pay on deposits -- has been since 2007 and represents a loss of 37 basis points since February 9.

However, the financial sector aside, Tuesday was a positive day on Wall Street, with advancing issues outpacing declining issues 2.7 to 1.

Netflix's upbeat earnings report helped push FAANG names higher -- Facebook (FB  168.66, +3.83), Apple (AAPL 178.24, +2.42), Amazon (AMZN 1503.83, +62.33), and Alphabet (GOOG 1074.16, +36.18) added between 1.4% and 4.3% -- which, in turn, helped push the consumer discretionary sector (+1.9%), which houses Amazon, and the technology sector (+2.0%), which houses the others, to the top of the sector standings. Tech giant Microsoft (MSFT 96.07, +1.90) also outperformed, adding 2.0%.

The CBOE Volatility Index (VIX) -- dubbed Wall Street's "fear gauge" -- dropped 10.0% on Tuesday to 14.89, which is its lowest level since early March. It's also worth noting that volume was relatively light on Tuesday, with just 720 million shares changing hands at the New York Stock Exchange; the 50-day moving average is 936 million.

Reviewing Tuesday's economic data, which included March Housing Starts and Building Permits and March Industrial Production and Capacity Utilization:

  • Housing starts increased to a seasonally adjusted annualized rate of 1.319 million units in March ( consensus 1.268 million), up from a revised 1.295 million units in February (from 1.236 million). Building permits rose to a seasonally adjusted 1.354 million in March ( consensus 1.315 million) from a revised 1.321 million in February (from 1.298 million).
    • The key takeaway from the report is that the monthly increases were driven entirely by multi-unit dwellings. Single-family starts were down 3.7% while single-family permits fell 5.5%, which is disappointing given the supply shortage of single-family homes.
  • Industrial Production increased 0.5% in March ( consensus +0.3%), while the February reading was revised to +1.0% (from +0.9%). Meanwhile, Capacity Utilization ticked up to 78.0% ( consensus 77.8%) from an unrevised reading of 77.7% in February.
    • The key takeaway from the report is that all three major industry groups played a part in driving the uptick in industrial production in March.

On Wednesday, investors will receive the weekly MBA Mortgage Applications Index and the Fed's Beige Book for March.

  • Nasdaq Composite: +5.5% YTD
  • Russell 2000: +2.9% YTD
  • S&P 500: +1.2% YTD
  • Dow Jones Industrial Average: +0.3% YTD

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