Day Traders Diary

12/20/18

The S&P 500 fell 1.6% on Thursday, as ongoing concerns over trade, politics, and economic growth added to worries over a Fed policy mistake. For the month, the benchmark index is now down 10.6%, while the Dow Jones Industrial Average (-2.0%), Nasdaq Composite (-1.6%), and the Russell 2000 (-1.7%) extend monthly losses to 10.5%, 10.9%, and 13.5%, respectively.

The S&P 500 staged a late recovery try to cut its losses from 2.6% to 0.8%, but that recovery effort was once again met with selling resistance that drove the market further into oversold territory.

Some nettlesome elements that weighed on investor sentiment Thursday included (1) the possibility of a partial government shutdown, (2) a reminder that the dispute between the U.S. and China goes much deeper than just tariffs on goods, and (3) the understanding that credit markets appear to be anticipating a growth slowdown due to tighter monetary policy.

Furthermore, weakness in oil ($44.95, -$2.33, -4.8%) and copper ($2.70, -$0.01, -0.4%) prices, and the underperformance by the cyclical sectors, fed into the market's concerns about a slowdown in global economic growth.

Within the S&P 500, 10 of the 11 sectors finished in the red with energy (-2.8%), consumer discretionary (-2.3%), and information technology (-1.9%) leading the retreat. The utilities sector, on the other hand, was able to muster a gain of 0.3%.

In corporate news, Walgreens Boots Alliance (WBA 69.61, -3.68) topped fiscal first quarter earnings estimates, yet its stock fell 5.0% after the company acknowledged it is facing margin pressures.

U.S. Treasuries closed on a lower note, pushing the 2-yr yield up three basis points to 2.67% and the 10-yr yield up one basis point to 2.79%. The U.S. Dollar Index fell 0.7% to 96.36, while gold futures settled 0.9% higher to $1267.00/oz, reaching its highest level since June.

Of note, the CBOE Volatility Index (VIX) peaked at February levels (30.25) before pulling back to 28.38. 

Reviewing Thursday's economic data, which included weekly Initial and Continuing Claims, the Philadelphia Fed Index for December, and the Conference Board's Leading Economic Index for November:

• Initial claims for the week ending December 15 increased by 8,000 to 214,000 (Briefing.com consensus 221,000). Continuing claims for the week ending December 8 increased by 27,000 to 1.688 million.
  • The key takeaway from the report is that it covers the period in which the survey for the December employment report is conducted. Accordingly, the low level of initial claims should translate into an expectation for solid nonfarm payroll growth in December.
• The Philadelphia Fed Survey for December declined to 9.4 (Briefing.com consensus 17.5) from an unrevised 12.9 in November.
• The Conference Board's Leading Economic Index increased 0.2% in November (Briefing.com consensus 0.1%) after decreasing a revised 0.3% (from +0.1%) in October.
  • The key takeaway from the report is that the Conference Board expects the pace of economic growth to continue moderating in the second half of 2019.

Looking ahead, investors will receive several economic reports on Friday: Personal Income and Spending for November; PCE Prices for November; Durable Orders for November; and GDP - Third Estimate for Q3 on Friday:

• Nasdaq Composite -5.4% YTD
• Dow Jones Industrial Average -7.5% YTD
• S&P 500 -7.1% YTD
• Russell 2000 -13.5% YTD

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  • Headlines provided by Briefing.com