Day Traders Diary

9/4/18

Stocks opened the holiday-shortened week on a modestly lower note, pulling back from last week's record highs amid continued uncertainty over U.S.-Canada trade relations. The S&P 500 finished with a loss of 0.2%, but did close in the upper half of its daily range. Meanwhile, the Dow slipped 0.1%, and the Nasdaq lost 0.2%.

Trade talks between the U.S. and Canada are set to resume on Wednesday after the two sides failed to reach an agreement to replace NAFTA on Friday as planned. The negotiations looked promising early last week, but appear to have soured since, with President Trump tweeting over the weekend that there's "no political necessity to keep Canada in the new NAFTA deal."

That tweet helped give the bears an advantage on Tuesday, which ended with eight of eleven sectors closing in negative territory. The lightly-weighted telecom services (-1.1%), real estate (-0.9%), and materials (-0.8%) groups were the worst performers, and the health care space (-0.7%) also showed notable weakness.

The top-weighted technology sector (-0.3%) finished in the red as well, with social media giant Facebook (FB 171.16, -4.57) dropping 2.6% following a downgrade at MoffetNathanson and ahead of Wednesday's appearance on Capitol Hill, during which the company will attempt to answer questions regarding political censorship and Russian propaganda.

Meanwhile, in the consumer discretionary sector, Nike (NKE 79.60, -2.60) fell 3.2% after the athletic shoe and apparel maker unveiled an ad for the 30th anniversary of its "Just Do It" slogan that features Colin Kaepernick, the former San Francisco 49ers quarterback credited with starting the controversial national anthem protests.

However, the consumer discretionary's largest component, Amazon (AMZN 2039.51, +26.80), became just the second U.S. company to achieve a market cap of $1 trillion, although AMZN shares did trim their gains after hitting the milestone, going from +1.9% to +1.3% and cutting the company's market cap to $995 billion by the close.

The consumer discretionary sector finished higher by 0.3%, and the financials (+0.5%) and utilities (+0.6%) groups also ended in the green.

Away from equities, crude oil went on a wild ride on Tuesday, going from +2.3% to -1.0% before settling with a loss of 0.3% at a price of $69.82/bbl. The volatility came as investors tried to gauge the impact of Tropical Storm Gordon, which is expected to make landfall on the Gulf Coast tonight, possibly as a hurricane.

Lastly, the U.S. Dollar Index advanced 0.3% to 95.35, hitting its highest level in over a week, and U.S. Treasuries sold off, sending yields higher across the curve. The yield on the benchmark 10-yr Treasury note jumped five basis points to 2.90%, hitting its highest level in three weeks.

Reviewing Tuesday's economic data, which was limited to the ISM Index for August and the Construction Spending report for July:

• The ISM Index for August increased to 61.3 from an unrevised reading of 58.1 in July, while the Briefing.com consensus expected a reading of 57.6.
  • The key takeaway from the report is that manufacturing activity is robust and consistent with a strong economy.
• Construction Spending increased 0.1% in July, while the Briefing.com consensus expected an increase of 0.5%. The June reading was revised to -0.8% from -1.1%.
  • The key takeaway from the report is that weakness in nonresidential private construction spending was the primary reason for the tepid growth overall.

Looking ahead, investors will receive the July Trade Balance, Auto and Truck Sales for August, and the weekly MBA Mortgage Applications Index on Wednesday.

• Nasdaq Composite +17.2% YTD
• Russell 2000 +12.9% YTD
• S&P 500 +8.3% YTD
• Dow Jones Industrial Average +5.0% YTD

Headlines provided by Briefing.com