Day Traders Diary



The S&P 500 lost 0.8% in another volatile session on Wednesday. The Dow Jones Industrial Average lost 0.8%, the Nasdaq Composite lost 0.9%, and the Russell 2000 lost 0.8%.

Stocks rallied at the open after the October CPI reading showed consumer prices rose 0.3% as expected last month, but soon fell back amid continued Apple (AAPL 186.80, -5.43) weakness and following a regulatory reminder from Congresswoman Maxine Waters.

Ms. Waters, who is set to take over the House Financial Services Committee this January, vowed that the days of weakening regulations will be coming to an end. Ms. Waters' comments should not be seen as a surprise, though, as it was understood this would likely be the case following the midterm election results.

In conjunction, a drop in interest rates did not bode well for the heavily-weighted financials sector (-1.4%). The 2-yr yield lost two basis points to 2.86%, and the 10-yr yield lost three basis points to 3.12%. The two yields have now lost seven basis points each this week.

Meanwhile, in the tech space (-1.3%), Apple dropped 2.8%, extending its monthly losses to 14.7%, after being downgraded to 'Neutral' from 'Buy' at Guggenheim on Thursday. Chip stocks, however, extended Tuesday's rebound, pushing the Philadelphia Semiconductor Index higher by 0.4%.

The lightly-weighted utilities sector (-1.1%) was another notable laggard, with PG&E (PCG 25.59, -7.13) plunging 21.8% after acknowledging it could be subject to significant liability in excess of insurance coverage that would be material to its financial condition if its equipment is found to be the cause of the Camp Fire in northern California. A spike in natural gas prices, which rose 17.1% to $4.80/MMBtu, also weighed on the sector, as utility companies use natural gas for generating electric power.

At the opposite end of the sector standings, the communication services space finished with a gain of 0.5%. Facebook (FB 144.22, +2.06, +1.5%), Alphabet (GOOG 1043.66, +7.61, +0.7%), and Comcast (CMCSA 38.29, +0.57, +1.5%) provided strong support for the group.

Meanwhile, an uptick in oil prices helped keep the energy sector (-0.1%) near its flat line. WTI crude rose 0.8%, settling at $56.14/bbl, to end a 12-session losing streak.

In earnings, Macy's (M 33.22, -2.57) fell 7.2% despite beating profit estimates and raising its earnings guidance for its fiscal 2019 year. Cannabis stocks Canopy Growth (CGC 34.30, -4.18, -10.9%) and Tilray (TLRY 102.34, 9.21, -8.3%) also dropped after reporting. Canopy missed revenue estimates, while Tilray beat earnings estimates but its revenue was at the low end of its upside pre-announcement.

Of note, at 6:00 PM ET, Fed Chairman Jerome Powell and Dallas Fed Bank President Robert Kaplan are expected to speak on global economic issues in Texas.

In Brexit news, UK Prime Minister Theresa May announced that her cabinet has approved the draft withdrawal agreement, but that draft is still subject to British Parliament and EU approval. The pound added 0.2% against the dollar to 1.2996.

Reviewing Wednesday's economic data, which included the Consumer Price Index for October and the weekly MBA Mortgage Applications Index:

  • The all items index for consumer prices increased 0.3% month-over-month in October while the all items index, excluding food and energy, increased 0.2%. Both were in-line with the consensus estimate.
    • The key takeaway from the report is that it points to a firming in consumer inflation, which fits the Federal Reserve's inclination to raise rates again in December.
  • The weekly MBA Mortgage Applications Index fell 3.2% after dropping 4.0% in the prior week.

Looking ahead, investors will receive a flurry of economic data on Thursday: Retail Sales for October, weekly Initial and Continuing Claims, Empire Manufacturing Survey for November, Import and Export Prices for October, Philadelphia Fed Index for November, and Business Inventories for September.

  • Nasdaq Composite +3.4% YTD
  • Dow Jones Industrial Average +1.5% YTD
  • S&P 500 +1.1% YTD
  • Russell 2000 -2.2% YTD
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