Day Traders Diary

1/7/19

The S&P 500 gained 0.7% on Monday, securing its fourth day of gains in the last five sessions. The Dow Jones Industrial Average gained 0.4%, the Nasdaq Composite gained 1.3%, and the Russell 2000 outperformed with a gain of 1.8%.

The major averages opened the session to some tepid buying interest. The S&P 500 briefly dipped into negative territory (-0.3%), but the pullback didn't gain any traction as the benchmark index steadily climbed to session highs (+1.4%) by early afternoon.

This resiliency to selling efforts following huge gains last Friday created some fear of missing out on further gains that helped drive up prices.

Stocks, however, began to lose steam at around 1:45 p.m. ET, shortly after President Trump tweeted that he will address the nation over border security Tuesday evening.

Nevertheless, selling didn't gain much traction, as nine of the 11 S&P 500 sectors finished the session with gains. The consumer discretionary (+2.4%) and energy (+1.3%) sectors outperformed, while the consumer staples (-0.3%) and utilities (-0.7%) groups dragged on the broader market.

Retail was a consistent group that outperformed and helped lift the consumer discretionary sector. The SPDR S&P Retail ETF (XRT 43.56, +1.31) rose 3.1%.

Notable movers included PG&E (PCG 18.95, -5.45) plunging 22.3% amid a possible bankruptcy filing and Loxo Oncology (LOXO 232.65, +92.78) soaring 66.3% after an offer to be acquired by Eli Lilly (LLY 115.28, +0.62, +0.5%) at a 68% premium over its Friday closing price. PG&E was an influential drag on the utilities sector. 

U.S. Treasuries started the session in positive territory, but spent the bulk of the day in a retreat that coincided with a rally in the stock market. The 2-yr yield rose four basis points to 2.52%, and the 10-yr yield added two basis points to 2.68%. The U.S. Dollar Index fell 0.5% to 95.70, reaching its lowest close since mid-October.

Separately, the U.S. and China kicked off a two-day round of trade talks in Beijing on Monday.

Reviewing Monday's lone economic report, the ISM Non-Manufacturing Index for December:

• The ISM Non-Manufacturing Index slipped to 57.6% in December (Briefing.com consensus 58.8%) from 60.7% in November. The dividing line between expansion and contraction is 50.0%, so the December reading reflects a deceleration in non-manufacturing business activity in the final month of 2018.
  • The key takeaway from the report is that it follows form with the ISM Manufacturing Index in showing a slowdown in activity in December. That is in keeping with the market's perception of economic matters and threatens to bleed into a slowdown in earnings growth.
  • According to ISM, the past relationship between the overall economy and the non-manufacturing index corresponds to a 3.2% increase in real GDP on an annualized basis.

Looking ahead, investors will receive the NFIB Small Business Optimism Index for December, the JOLTS - Job Openings and Labor Turnover report for November, and Consumer Credit for November on Tuesday.

• Russell 2000 +4.2% YTD
• Nasdaq Composite +2.8% YTD
• S&P 500 +1.7% YTD
• Dow Jones Industrial Average +0.9% YTD

• • •  
    •  
  • Headlines provided by breifing.com