Day Traders Diary

4/20/18

Stocks retreated for the second day in a row on Friday, with shares of tech giant Apple (AAPL 165.72, -7.08, -4.1%) falling sharply. The S&P 500 lost 0.9%, the Dow Jones Industrial Average dropped 0.8%, and the tech-heavy Nasdaq Composite declined 1.3%, but all three major averages managed to maintain modest gains for the week.

Friday's selling was broad-based, with 10 of 11 S&P 500 sectors finishing in the red. The technology (-1.5%) and consumer staples (-1.7%) groups were the worst-performing sectors, while the financial space (+0.1%) finished at the top of the sector standings with a slim gain. Stocks were modestly lower at the opening bell, but selling accelerated after the S&P 500 breached its 50-day moving average (2687). The major averages finished a step above their session lows thanks to a late rally.

Apple led the tech sector lower on Friday, with its shares dropping 4.1%, following cautious commentary from analysts, who warned that iPhone sales could slow in the coming months. These concerns flowed from the weak guidance that Taiwan Semi (TSM 38.95, -0.58, -1.5%) gave on Thursday, which was attributed, in part, to softer smartphone demand. Apple shares did find some support at their 200-day moving average though, closing right on top of the key technical level.

Meanwhile, in the financial sector, shares of Wells Fargo (WFC 52.56, +1.02) had a positive showing, rallying 2.0%, after the big bank agreed to pay $1 billion to settle loan abuse allegations. Wells Fargo's positive performance helped underpin the financial group, but a steepening of the yield curve was likely the more influential factor; the 2s10s spread ticked up two basis points to 51 basis points -- up from 42 basis points on Tuesday. The benchmark 10-yr yield ended four basis points higher at 2.95% -- its highest level in more than four years.

On the earnings front, shares of General Electric (GE 14.54, +0.55) jumped 3.9% after the Dow component reported better-than-expected earnings and revenues for the first quarter and reaffirmed its guidance for fiscal year 2018. Shares of fellow industrial giant Honeywell (HON 150.57, +2.44) also climbed following upbeat Q1 results, adding 1.7%.

In politics, the Democratic National Committee filed a lawsuit on Friday against the Russian government, the Trump campaign, and the WikiLeaks organization, alleging that they conspired to tilt the 2016 presidential election in Mr. Donald Trump's favor. The news had a negligible impact on trading.

Investors didn't receive any economic data on Friday.

• Nasdaq Composite: +3.5% YTD
• Russell 2000: +1.9% YTD
• S&P 500: -0.1% YTD
• Dow Jones Industrial Average: -1.0% YTD

Week In Review: Holding On

The U.S. stock market notched its second consecutive weekly advance this week, but big losses on Thursday and Friday left a bad taste in investors' mouths going into the weekend. The S&P 500 added 0.5% this week, while the Dow Jones Industrial Average and the Nasdaq Composite climbed 0.4% and 0.6%, respectively.

Wall Street kicked off the week on a positive note, breathing a sigh of relief after a U.S.-led strike on Syria over the weekend -- which was in response to a suspected chemical attack from the Syrian government on the rebel-held town of Douma -- turned out to be less dramatic than many had feared. Russian President Vladimir Putin -- who supports Syrian President Bashar al-Assad -- condemned the attack, saying additional strikes could invite chaos in global affairs, but made no mention of a military response to this particular incident -- leading investors to believe that the dust has settled for now.

The bullish bias carried over into Tuesday's session, as investors turned their attention to the earnings front. Netflix (NFLX) soared nearly 10% on Tuesday, hitting a new all-time high, after crushing subscriber growth estimates for the first quarter and issuing upbeat guidance for Q2. Goldman Sachs (GS) had a blow-out first quarter, easily beating both earnings and revenue estimates, but its shares struggled to advance on Tuesday, putting the investment bank on a long list of financial names that have failed to rally on upbeat results.

Stocks moved higher once again on Wednesday, but only modestly so, as IBM (IBM) weighed on investor sentiment. Shares of the tech giant tumbled 7.5% in the midweek session after the company's above-consensus first quarter profits and revenues were overshadowed by its disappointing gross margin rate, the quality of its revenue (more from hardware and less from cloud), and its relatively conservative profit guidance for fiscal year 2018. Meanwhile, energy shares outperformed as crude oil futures returned to their highest level in more than three years.

On Thursday, the market registered its first loss of the week, with consumer staples shares pacing the retreat. Shares of tobacco giant Philip Morris (PM) plunged 15.6% after reporting a decline in cigarette shipment volume for the first quarter and slower-than-expected growth for its IQOS product -- which heats tobacco instead of burning it. Meanwhile, Apple supplier Taiwan Semi (TSM) led a broad tech retreat after its first quarter earnings and revenues came in below estimates; the chipmaker also lowered its guidance for Q2.

Wall Street ended the week with another disappointing performance on Friday. The technology sector showed relative weakness once again, with its top component by market cap -- Apple (AAPL) -- sliding 4.1% after several analysts raised concerns about the prospect of iPhone sales being weaker than expected. Financials provided some relief though. Financial giant Wells Fargo (WFC) was particularly strong, adding 2.0%, after agreeing to pay $1 billion to settle loan abuse allegations.

In the end, seven S&P sectors finished with weekly gains, while four finished with weekly losses. The energy group (+2.6%) was the top-performing group, as WTI crude futures advanced 1.5% over five sessions, closing Friday at $68.38 per barrel. Conversely, the consumer staples sector (-4.4%) was the worst performer by a large margin, extending its 2018 loss to 11.8%; for comparison, the S&P 500 has slipped 0.1% year to date. In general, growth-sensitive sectors outperformed defensive ones, although the top-weighted technology group (-0.2%) bucked this trend.

The yield curve ultimately steepened this week, but not before the 2s10s spread hit a 10-year low. Fed officials generally don't appear to be worried about a still low 2s10s spread -- which closed at 51 basis points on Friday -- leading the market to still believe that there will be at least three rate hikes this year in total.

Headlines provided by Briefing.com