Day Traders Diary
The S&P 500 gained 0.9% on Thursday, as another batch of better-than-feared earnings added to the optimism surrounding U.S.-China trade relations and a dovish-minded Federal Reserve. The Nasdaq Composite gained 1.4%, and the Russell 2000 gained 0.8%.
The Dow Jones Industrial Average, however, lost 0.1% due in large part to negative price action in Microsoft (MSFT 104.43, -1.95, -1.8%), Visa (V 135.01, -2.59, -1.9%), and DowDuPont (DWDP 53.81, -5.47, -9.2%) following their earnings reports.
The S&P 500 communication services sector was easily the best-performing group on Thursday, rising 3.7% on the strength of Facebook (FB 166.69, +16.27, +10.8%) and Charter Communications (CHTR 331.05, +41.14, +14.2%). The utilities (+2.1%) and consumer staples (+1.8%) sectors also outperformed the broader market.
Facebook delivered fourth quarter results that were both better than expected and better than feared in light of the negative publicity surrounding Facebook's shortcomings in protecting users' data privacy. Charter Communications for its part reported year-over-year revenue growth that was above expectations.
General Electric (GE 10.16, +1.06) was another story stock, climbing 11.7%, after the company beat revenue expectations and pleased investors with a $4.9 billion free cash flow figure and a lower-than-expected $1.5 billion settlement with the Department of Justice.
On the other hand, the underperformance from the heavily-weighted information technology (-0.1%) and financial (-0.3%) sectors weighed on the broader market. Also, the lightly-weighted materials sector (-1.5%) was the worst-performing group.
Financial stocks, in particular, fell in part for the same reason the broader market rallied: an expectation that the Fed will not be raising interest rates soon and that it is discussing an earlier end than expected to its balance sheet normalization effort.
The Treasury market seems to be pricing in a softer economic outlook, which has been reflected in the sharp drop in yields following Wednesday's FOMC decision and Fed Chair Powell's press conference.
After both the 2-yr yield and the 10-yr yield decreased four basis points Wednesday, the 2-yr yield fell seven basis points to 2.46% today while the 10-yr yield fell six basis points to 2.64%. The U.S. Dollar Index increased 0.2% to 95.57.
Separately, WTI crude lost 1.0% to $53.77/bbl, although it finished the month up 18.4%.
Reviewing Thursday's economic data, which included New Home Sales for November, the fourth quarter Employment Cost Index, the Chicago PMI for January, and the weekly Initial and Continuing Claims report:
Looking ahead, investors will receive a big batch of economic data on Friday: the Employment Situation Report for January, the ISM Manufacturing Index for January, the final reading of the University of Michigan Index of Consumer Sentiment for January, Construction Spending for November, and Wholesale Inventories for November.
Headlines provided by Briefing.com
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