Day Traders Diary

12/10/18

The S&P 500 gained 0.2% on Monday in what was yet another volatile day of trading on Wall Street. The benchmark index overcame a loss of 1.9% intraday despite the uncertainty surrounding trade, growth prospects, the path of interest rates, and geopolitics. 

Meanwhile, the Dow Jones Industrial Average rose 0.1% after being down as much as 2.1%, Nasdaq Composite gained 0.7% after being down as much as 1.3%, and the Russell 2000 lost 0.3%, though it was down as much as 1.7%.

The major indices fell to session lows shortly after UK Prime Minster Theresa May announced she will be delaying the vote in Parliament originally scheduled for Tuesday on the UK-EU Brexit plan.

It wasn't exactly surprising news since it had been speculated before the open that Ms. May was likely going to announce today a delay in the vote. It was also reported that the vote would have likely been defeated had it been held on Tuesday. Nevertheless, the announcement crystallized the uncertainty surrounding the Brexit matter, which left it akin to pouring fuel on a fire of uncertainty on a host of other issues that have been weighing on investor sentiment and stock prices.

Consequently, there was some knee-jerk selling following the news.  That selling interest, though, was soon met with buying activity that coincided with the close of European markets at 11:30 a.m. ET and a sharp rebound in shares of Apple (AAPL 169.60, +1.11, +0.7%) that took hold shortly thereafter.

There wasn't a specific catalyst for the turn in Apple, which had been knocked down early following reports that a court in China granted Qualcomm (QCOM 57.24, +1.25, +2.2%) an injunction against Apple, banning the import and sale of most iPhones in China due to a Qualcomm software patent.

Apple said the patents in question do not apply to the latest operating system that comes installed on all new iPhones, and has filed an appeal to overturn the sales ban, according to CNBC.  

Within the S&P 500, the information technology (+1.4%) and communication services (+0.7%) outperformed to help lift the broader market from its early struggles.

Semiconductor stocks helped lead the tech sector rebound effort.  The Philadelphia Semiconductor Index climbed 1.4% with Broadcom (AVGO 239.25, +10.69, +4.5%) extending its post-earnings gains from Friday.  Facebook (FB 141.85, +4.43, +3.2%), meanwhile, carried the communication services sector following an announcement after Friday's close that it will be boosting its share buyback authorization by $9 billion.

The real estate sector (-0.4%) was one of only three sectors to close Monday with a loss.  The other two were the energy (-1.6%) and financial (-1.4%) sectors, which fed into the concerns over economic growth along with the underperformance of the Dow Jones Transportation Average (-0.8%)

Looking at energy, WTI crude fell 2.9% to $51.10/bbl. Continued weakness in oil prices has been an influential drag on the oil-sensitive sector, which is now down over 17.0% this quarter. In the same period, crude is down 30.2%.

Monday's decline also extended the financial sector's position as the worst-performing group this month with a loss of 8.4%. Notable laggards included Wells Fargo (WFC 48.80, -1.46, -2.9%) and Bank of America (BAC 24.76, -0.67, -2.6%).

The contrasting performances from the heavily-weighted tech and financial sectors was a noteworthy occurrence. While the behavior of the technology stocks will likely command the most attention as a potential short-term market catalyst, the behavior of the financial sector should not be overlooked given its command position as a driver of economic activity.

Separately, the bond market settled down from last week's hot streak, pushing yields slightly higher. The 2-yr yield added two basis points to 2.72%, and the 10-yr yield added one basis point to 2.86%.

The U.S. Dollar Index climbed 0.7% to 97.20, benefiting largely at the expense of the British pound, which fell 1.7% to 1.2558 against the dollar as news of the delayed vote on the UK-EU Brexit plan stirred angst about the future of leadership in the UK and the specter of a messy "no deal" Brexit.

Overseas, global equities closed Monday on a lower note amid the uncertainty surrounding global trade issues and Brexit. Japan's Nikkei led the Asian retreat with a loss of 2.1%, and Germany's DAX led the European retreat with a loss of 1.5%.

Reviewing Monday's lone economic report, the JOLTS - Job Openings and Labor Turnover Survey for October showed job openings increased to 7.079 million from a revised 6.960 million (from 7.009 million) in September.

Looking ahead, investors will receive the NFIB Small Business Optimism Index for November and the Producer Price Index for November on Tuesday.

• Nasdaq Composite +1.7% YTD
• Dow Jones Industrial Average -1.2% YTD
• S&P 500 -1.3% YTD
• Russell 2000 -6.0% YTD

• • •  
  • Headlines provided by Briefing.com