Day Traders Diary

7/16/18

Stocks opened the week with a sleepy performance on Monday that ended with a slim loss of 0.1% for the S&P 500. The Nasdaq Composite also declined, losing 0.3%, but the Dow Jones Industrial Average managed to add 0.2%. The Russell 2000 underperformed, dropping 0.5%.

President Trump capped a week-long trip to Europe by meeting with Russian president Vladimir Putin in Helsinki, Finland. The leaders met for roughly four hours, discussing a wide range of topics, including arms control, the future of Syria, and, of course, Russian interference in the 2016 U.S. election, which Mr. Putin again denied. The market had a muted reaction to the summit.

Back on the home front, energy (-1.2%) was the worst-performing sector on Monday amid another dive in crude prices. WTI crude futures dropped 3.8% to $68.34/bbl and are now 7.8% below the nearly three-and-a-half year high they touched last week. The widely-cited catalyst was a Friday comment from Treasury Secretary Mnuchin, who said some countries may receive waivers to continue buying oil from Iran. However, several other factors -- including restored Libyan production -- were also at play.

Conversely, the heavily-weighted financial sector (+1.8%) rallied, easily closing atop of the day's leaderboard. Bank of America (BAC 29.78, +1.23) led the way, rallying 4.3% on better-than-expected Q2 earnings, but BlackRock (BLK 503.96, -3.13) lost 0.6% despite also beating on the bottom line.

The consumer discretionary (+0.2%) and telecom (+0.5%) sectors also advanced, but the eight other groups (including energy) finished in the red.

In the bond market, U.S. Treasuries declined on Monday, sending yields higher across the curve. Both the 2-yr yield and the benchmark 10-yr yield climbed three basis points, closing at 2.60% and 2.86%, respectively. That leaves the 2-10 spread at 26 basis points, its lowest level in over a decade.

Reviewing Monday's economic data, which included June Retail Sales, the July Empire Manufacturing Index, and May Business Inventories:

• June retail sales rose 0.5% (Briefing.com consensus +0.5%), while the May increase was revised to 1.3% from 0.8%. Excluding autos, retail sales increased 0.4% in June (Briefing.com consensus +0.3%), and the May increase was revised to 1.4% from 0.9%.
  • The key takeaway from the report is that it substantiates the widely-held views that an increase in consumer spending is going to factor prominently in driving a strong acceleration in Q2 GDP growth.
• The Empire Manufacturing Survey for July declined to 22.6 (Briefing.com consensus 21.0) from the prior month's unrevised reading of 25.0.
• Business Inventories rose 0.4% in May (Briefing.com consensus +0.4%). The April reading was left unrevised at +0.3%.
  • The inventories-to-sales ratio dipped to 1.34 from 1.35 and was down from 1.39 one year ago.

Looking ahead, Industrial Production and Capacity Utilization for June and the NAHB Housing Market Index for July will be released on Tuesday. As for earnings, Charles Schwab (SCHW), Goldman Sachs (GS), Johnson & Johnson (JNJ), and UnitedHealth (UNH) will report before the opening bell.

• Nasdaq Composite +13.1% YTD
• Russell 2000 +9.3% YTD
• S&P 500 +4.7% YTD
• Dow Jones Industrial Average +1.4% YTD

Headlines provided by Briefing.com