Day Traders Diary

4/18/18

Equity indices are mixed at midday after a range-bound first half of trading. The S&P 500 and the Nasdaq Composite are up 0.3% and 0.4%, respectively, while the Dow Jones Industrial Average is down 0.1%. All three major averages are looking for their third consecutive win and are up between 1.7% and 2.9% week to date.

The latest batch of first quarter earnings included results from tech giant IBM (IBM 148.75, -12.16), financial services firm Morgan Stanley (MS 53.16, -0.08), and a couple of transport names, including railroad giant CSX (CSX 60.05, +3.48) and airline United Continental (UAL 71.72, +4.38). All four companies beat earnings estimates and three of the four -- IBM, MS, and CSX -- also beat on revenues, but shares of the companies have had a mixed reaction thus far.

On the downside, IBM shares have dropped 7.5%, with investors citing the company's disappointing gross margin rate, the quality of its revenue (more from hardware and less from cloud), and its relatively conservative FY18 earnings guidance. Shares of Morgan Stanley, meanwhile, started the session in positive territory, but have since dropped into the red and are currently down 0.5%. The reversal has fueled another disappointing performance from the heavily-weighted financial sector (-0.5%), which has struggled as of late despite largely upbeat Q1 results.

Conversely, shares of CSX and United Continental have rallied today, rising 6.2% and 6.7%, respectively, helping to push the Dow Jones Transportation Average higher by 2.0%. The DJTA is seen as a leading indicator for the U.S. economy, so its outperformance typically has a positive impact on investor sentiment.

Meanwhile, the price of crude oil has rebounded today following two down sessions, returning to a three-year high, after the Energy Information Administration reported that U.S. crude inventories declined by 1.1 million barrels last week. West Texas Intermediate crude futures are currently up 1.8% at $67.73 per barrel after cracking $68.00 per barrel earlier in the session. Accordingly, the S&P's energy sector is trading atop the sector standings with a gain of 1.6%.

In total, seven sectors are in the green, and four are in the red. Industrials, which houses transportation names, is trading behind energy at the top of the leaderboard, up 1.1%, while financials and consumer staples trade at the bottom, down 0.5% and 0.8%, respectively. The top-weighted technology sector, which houses IBM, also underperforms, shedding 0.1%.

Outside of equities, U.S. Treasuries have sold off today in a curve-steepening trade that's pushed the 2s10s spread to 44 basis points from 42 bps on Tuesday; the yield on the benchmark 10-yr Treasury note is up four basis points at 2.85%. Meanwhile, the U.S. Dollar Index is a tick higher, up 0.1% at 89.29.

As for economic data, the weekly MBA Mortgage Applications Index was released this morning, showing an increase of 4.9%, while the Fed's Beige Book for March will cross the wires at 2:00 PM ET.