Day Traders Diary



The market ticked higher on Wednesday, with financial and industrial shares doing the heavy lifting. The S&P 500 and the Dow advanced 0.2% and 0.3%, respectively, but the tech-heavy Nasdaq lagged, closing just a tick below its unchanged mark and narrowly missing a new record. The small-cap Russell 2000 added 0.3%.

Two sectors stood out on Wednesday -- financials and industrials. They were the only sectors to register a gain or loss of more than 1.0%, closing higher by 1.5% and 1.1%, respectively. Consumer staples was the weakest sector, losing 0.7%, but no other group advanced or declined more than 0.5%.

The financial sector was helped by Warren Buffet's Berkshire Hathaway (BRK.B 200.44, +10.03), which rallied 5.3% after eliminating a restriction on its ability to buy back its own shares. Morgan Stanley (MS 50.56, +1.38) was also a positive influence, climbing 2.8% on better-than-expected Q2 results. U.S. Bancorp (USB 50.72, -0.58) declined 1.1%, however, despite beating bottom-line estimates.

Meanwhile, in the industrial space, transports were particularly strong following upbeat earnings and guidance from CSX (CSX 69.00, +4.56) and United Continental (UAL 79.00, +6.38); the two companies added 7.1% and 8.8%, respectively. Likewise, industrial supplier Grainger (GWW 338.99, +34.03) spiked 11.2% after also beating earnings estimates and raising its guidance.

In other corporate news, the EU hit Alphabet (GOOG 1195.88, -2.92) with a $5 billion antitrust fine for allegedly using its Android mobile operating system to stifle competition, and Papa John's (PZZA 53.60, +2.06) shares spiked 4.0% on a Wall Street Journal report that its founder and recently ousted chairman held merger talks with Wendy's (WEN 17.77, +0.34).

Fed Chair Jerome Powell wrapped up his semiannual appearance on Capitol Hill on Wednesday, testifying before the House Financial Services Committee. His appearance didn't produce any new insights into monetary policy, but Mr. Powell did express concern about cryptocurrencies, which he believes pose serious risks to investors.

In trade-related news, NEC Director Larry Kudlow said in an interview with CNBC that trade talks with China have stalled, but the administration is making "good progress" in negotiations with Mexico. The market's reaction was largely muted -- somewhat surprising considering the knee-jerk reactions that trade-related headlines have gotten as of late.

WTI crude futures were volatile on Wednesday, reversing a loss of 2.6% to finish higher by 1.6% at $68.70 per barrel. The reversal, which came despite the government's weekly inventory report showing a build of 5.8 million barrels, was helped by reports of an Iranian-backed Houthi movement attack on a Saudi Aramco refinery in Riyadh.

Reviewing Wednesday's economic data, which included June Housing Starts and Building Permits, the latest issue of the Fed's Beige Book, and the weekly MBA Mortgage Applications Index:

  • Housing starts declined to a seasonally adjusted annualized rate of 1.173 million units in June ( consensus 1.318 million), down from a revised 1.337 million units in May (from 1.350 million). Building permits declined to a seasonally adjusted 1.273 million in June ( consensus 1.330 million), down from an unrevised 1.301 million in May.
    • The key takeaway from the report is that it reflects weakness at a time when there should be strength. The assumption embedded in the weak starts figure is that it likely reflects the difficulty builders are having finding labor, as well as the constraints they are facing with higher land, labor, and material costs.
  • According to the Fed's Beige Book, economic activity continued to expand across the United States, with 10 of the 12 Federal Reserve Districts reporting moderate or modest growth. The outliers were the Dallas District, which reported strong growth driven in part by the energy sector, and the St. Louis District where growth was described as slight.
  • The weekly MBA Mortgage Applications Index decreased 2.5% after also declining 2.5% last week.

Looking ahead, the weekly Initial Claims report, the Philadelphia Fed Index for July, and the Conference Board's Leading Economic Index for June will be released on Thursday.

  • Nasdaq Composite +13.8% YTD
  • Russell 2000 +10.2% YTD
  • S&P 500 +5.3% YTD
  • Dow Jones Industrial Average +1.9% YTD

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