Day Traders Diary

1/24/19

The S&P 500 eked out a gain of 0.1% on Thursday as it wavered between small gains and losses throughout the day. Another round of better-than-expected corporate earnings coupled with ongoing global growth concerns contributed to a mixed session on Wall Street.

The Dow Jones Industrial Average lost 0.1%, the Nasdaq Composite gained 0.7%, and the Russell 2000 gained 0.7%.

Some discouraging commentary from Commerce Secretary Wilbur Ross and European Central Bank President Mario Draghi helped temper buying interest.

Specifically, Mr. Ross said the U.S. and China are still "miles and miles" from reaching a trade deal, and Mr. Draghi acknowledged that significant stimulus is still needed for the eurozone. These comments stirred concerns about the pace of future economic growth, which in turn stirred concerns about the pace of future earnings growth.

Nevertheless, the cyclical information technology (+0.9%), energy (+0.6%), and industrial (+0.6%) sectors managed to outperform the broader market. Conversely, the consumer staples (-1.3%), health care (-0.9%), and material (-0.6%) sectors were the lone groups to finish in the red.

The Philadelphia Semiconductor Index was a notable pocket of strength on Thursday, rising 5.7% on the back of some strong earnings reports. The outperformance in chip stocks underpinned the strength in the heavily-weighted tech sector and the tech-heavy Nasdaq.

Heavyweight component Texas Instruments (TXN 102.09, +6.60) rose 6.9%, while Lam Research (LRCX 161.20, +21.87, +15.7%), Xilinx (106.06, +16.51, +18.4%), and Teradyne (TER 36.04, +4.11, +12.9%) each surged well over 10% following their earnings reports.

In addition, better-than-feared earnings and guidance from the transport stocks, particularly the airlines, helped lift the Dow Jones Transportation Average (+1.1%) and the industrial sector.

American Airlines (AAL 33.66, +2.01, +6.4%), Southwest Air (LUV 54.21, +3.19, +6.3%), JetBlue (JBLU 18.12, +0.88, +5.1%), and Union Pacific (UNP 160.34, +6.01, +3.9%) all beat earnings and revenue estimates.

On the other hand, McCormick (MKC 124.35, -14.65) was a bit of a story stock, dropping 10.5% after it missed Q4 top and bottom-line estimates and guided fiscal 2019 earnings and revenue below consensus. Its poor performance was a huge drag on the consumer staples sector (-1.3%).  Another story stock was PG&E (PCG 13.95, +5.96, +74.6%), which surged late in the day on a report that a California investigation cleared the company from issues surrounding the 2017 Tubbs wildfire.

U.S. Treasuries ended on a higher note, pushing yields lower across the curve. The 2-yr yield decreased three basis points to 2.56%, and the 10-yr yield decreased four basis points to 2.71%. The U.S. Dollar Index rose 0.4% to 96.53, benefiting at the expense of the euro, which fell on the back of Mr. Draghi's cautious-minded remarks. WTI crude rose 1.0% to $53.15/bbl.

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

• Weekly initial claims decreased by 13,000 to 199,000 (Briefing.com consensus 217,000) for the week ending January 19. That is the lowest level of initial claims since November 15, 1969. Continuing claims for the week ending January 12 dropped by 24,000 to 1.713 million.
  • The key takeaway from the report is that the low level of initial claims is reflective of a tight labor market.
• The Conference Board's Leading Economic Indicators Index decreased 0.1% in December (Briefing.com consensus -0.1%) after increasing 0.2% in November. The Leading Indicators report for December included estimates for manufacturers' new orders for consumer goods and materials for November and December and Building Permits for December due to the ongoing partial government shutdown. The Conference Board will not release its annual benchmark revision of indicators until underlying data become available once the government reopens.
  • The key takeaway from the report is that the Conference Board sees a path to GDP growth slowing to 2.0% by the end of 2019.

Investors will not receive any notable economic data on Friday.

• Russell 2000 +8.6% YTD
• Nasdaq Composite +6.6% YTD
• S&P 500 +5.4% YTD
• Dow Jones Industrial Average +5.3% YTD
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  • Headlines provided by Briefing.com