Day Traders Diary

3/12/19

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  The S&P 500 gained 0.3% on Tuesday, adding to its strong start to the week. Softening inflation data, persistently low U.S. Treasury yields, and leadership from Apple (AAPL 180.91, +2.01, +1.1%) and Alphabet (GOOG 1193.20, +17.44, +1.5%), helped the market overcome continued weakness in Boeing (BA 375.41, -24.60, -6.2%). 

  The Nasdaq Composite gained 0.4%, and the Russell 2000 gained 0.1%.

  The Dow Jones Industrial Average lost 0.4% amid Boeing's notable problems pertaining to the grounding of its 737 MAX by several countries, as well as the European Union. There were burgeoning calls from politicians in Washington to do the same here despite Boeing and the FAA both expressing confidence in the airworthiness of the 737 MAX. 

  The S&P 500 health care (+0.7%), utilities (+0.6%), energy (+0.6%), and communication services (+0.6%) sectors led Tuesday's advance. Conversely, the industrials (-0.9%) and consumer staples (unch) sectors underperformed.

  The broader market began the day modestly higher, supported by a soft Consumer Price Index (CPI) for February. 

  February CPI was up 0.2%, as expected. Core CPI, which excludes food and energy, was up just 0.1% in February. On a year-over-year basis, total CPI eased to 1.5% from 1.6% in January while core CPI eased to 2.1% from 2.2% in January.

  The year-over-year trend contributed to the notion that the Fed will keep its patient mindset on monetary policy, which remains a supportive consideration for risk assets. The soft data prompted further strength in the U.S. Treasury market, which sent yields even lower. 

  The 2-yr yield declined three basis points to 2.44%, and the 10-yr yield declined four basis points to 2.61%.

  These developments, along with relative strength from Apple and Alphabet on no "new" news, had the S&P 500 toying with the 2800 level on several occasions. There wasn't enough buying interest, however, for the market to break above that level. 

  That effort was further curtailed following a knee-jerk dip on the news that Prime Minster May's plan for Brexit did not win approval in the British Parliament. The selling on the news of the vote's defeat looked out of line with a market that had little concern for Brexit matters yesterday, and today, when it knew Ms. May was unlikely to prevail.

  There will be a "no deal" Brexit vote on Wednesday. If that is not approved, then there will be a vote Thursday to extend the UK's divorce date (currently March 29) from the EU.

  In earnings news, Dick's Sporting Goods (DKS 34.61, -4.28) fell 11.0% after disappointing investors with its results. Stitch Fix (SFIX 33.78, +6.80) surged 25.2% following a strong earnings report.

  Reviewing Tuesday's economic data, which included the Consumer Price Index for February and the NFIB Small Business Optimism Index for February:

• Total CPI was up 0.2% month-over-month in February, as expected, while core CPI, which excludes food and energy, was up only 0.1% (Briefing.com consensus +0.2%).
  • The key takeaway from the report is that inflation trends for total CPI and core CPI both moved lower on a year-over-year basis. Total CPI was up 1.5%, versus 1.6% for the 12 months ending in January, whereas, core CPI was up 2.1%, versus 2.2% for the 12 months ending in January. The disinflation will indeed keep the Fed in a patient state of mind.
• The NFIB Small Business Optimism Index for February increased to 101.7 from the prior reading of 101.2 in January.

• Looking ahead, investors will receive the Producer Price Index for February, Durable Orders for January, Construction Spending for January, and the weekly MBA Mortgage Applications Index on Wednesday.

• Russell 2000 +14.9% YTD
• Nasdaq Composite +14.4% YTD
• S&P 500 +11.4% YTD
• Dow Jones Industrial Average +9.6% YTD
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  • Headlines provided by Briefing.com