Day Traders Diary

3/19/19

The S&P 500 advanced as much as 0.7% on Tuesday, bolstered by dovish expectations ahead of the Federal Reserve's policy decision on Wednesday. Conflicting U.S-China trade headlines, however, induced some profit-taking interest after a recent stretch of gains, as did a late-day slide in oil prices, which hit their highs for the year earlier in the session. The S&P 500 was down as much as 0.3% but managed to close near its flat line.

The Dow Jones Industrial Average (-0.1%) and the Russell 2000 (-0.6%) finished lower after being up as much as 0.8% and 0.5%, respectively. The Nasdaq Composite finished higher by 0.1% after being up as much as 0.7%.

The S&P 500 utilities (-1.2%), financials (-0.8%), and industrial (-0.4%) sectors underperformed the broader market. Conversely, the health care (+0.8%), consumer discretionary (+0.5%), and information technology (+0.2%) sectors were the lone groups to finish with gains.

The market opened higher on expectations that the Fed will hold the fed funds rate steady and reiterate a patient mindset at the conclusion of its two-day policy meeting Wednesday. There was also speculation that the dot plot will show a reduced rate-hike projection for 2019, and that the Fed could announce a plan regarding the timing for ending its balance sheet runoff.

In addition, some reassuring data from Europe and the latest fund manager survey from Bank of America/Merrill Lynch, which showed the allocation to equities is at its lowest since September 2016, helped fuel early gains.

The stock market, however, was knocked off its session highs following a Bloomberg report that U.S. officials are concerned China will walk back its trade offers. A follow-up report from The Wall Street Journal offered a more positive perspective: the two sides are expected to hold meetings in Beijing and Washington over the next two weeks in hopes for a deal by the end of April.

The Philadelphia Semiconductor Index (+1.3%) and the Dow Jones Transportation Average (-1.3%), both of which are regarded as having leading indicator status, made disparate moves on Tuesday.

Notable chipmaker Advanced Micro (AMD 26.00, +2.75) rose 11.8% as Google confirmed a partnership with the company for its new gaming streaming service. On the other hand, transport heavyweight Union Pacific (UNP 160.75, -5.49, -3.3%) dragged on the transportation average after it was downgraded to 'Hold' from 'Buy' at Loop Capital. Trucking stocks were also weak following a first quarter earnings warning from Covenant Transportation (CVTI 19.61, -1.79, -8.4%).

U.S. Treasuries closed on a lower note, pushing yields slightly higher. The 2-yr yield and the 10-yr yield increased one basis point each to 2.46% and 2.61%, respectively. The U.S. Dollar Index declined 0.2% to 96.37. WTI crude increased 0.1% to $59.34/bbl.

Reviewing Tuesday's lone economic report, Factory Orders for January:

• Factory orders increased 0.1% in January (Briefing.com consensus +0.2%) on the heels of an unrevised 0.1% increase in December.
  • The key takeaway from the report is that business investment picked up, evidenced by a 0.8% increase in orders for nondefense capital goods excluding aircraft that followed a 0.8% decline in December. Shipments of those same goods also increased 0.8% in January, which will be a positive input for Q1 GDP forecasts.

Looking ahead, investors will receive the FOMC Rate Decision and the weekly MBA Mortgage Applications Index on Wednesday.

• Nasdaq Composite +16.4% YTD
• Russell 2000 +15.3% YTD
• S&P 500 +13.0% YTD
• Dow Jones Industrial Average +11.0% YTD

• Headlines provided by Briefing.com
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