Day Traders Diary

9/27/19

The major averages finished lower after news broke that the White House is considering limits on U.S. investment into China, aggravating the protracted trade dispute between the globe's two largest economies. The Dow Jones Industrial Average erased a gain of about 130 points following the report and closed down 70.87 points at 26,820. The S&P 500 also reversed sliding 0.5% to 2,961. The Nasdaq Composite dropped 1.1% to finish the day at 7,939. The S&P 500 briefly fell below its 50-day moving average (2949), but buyers quickly stepped in to bring the benchmark index back above the key technical level.

The S&P 500, Dow and Nasdaq Composite all notched week-to-date losses, down 1%, 0.4% and 2.1%, respectively. The decline in all three major indexes for the week follows the prior week's decline.

Trump administration officials are discussing ways to curb U.S. financial exposure in China, including a block of all-American investment in the country, a person familiar with the talks told CNBC. Though the person cautioned that the discussion was still in early stages, such an action could send shockwaves throughout financial markets and involve the billions of dollars in investments tied to major indexes.

Curtailing American investment in China would be undertaken with the stated goal of protecting U.S. investors from excessive risk due to lack of regulatory supervision. The White House declined to comment on the report.

Nine of the 11 S&P 500 sectors finished in the red, led lower by the trade-sensitive, and heavily-weighted, information technology sector. Semiconductor stocks like Micron dropped 11% following earnings and trade concerns. Chinese stocks listed in the U.S. finished sharply lower. Alibaba fell 5%, JD.com fell 6.0% and Baidu fell 3.7%.

To the plus side, Wells Fargo rose 3.8% after the announcement of a new CEO, Charles W. Scharf, the previous CEO of BNY Mellon and before that Visa.

U.S. Treasuries finished the session slightly higher, pushing yields lower. The 2-yr yield declined three basis points to 1.62%, and the 10-yr yield declined one basis point to 1.68%. The U.S. Dollar Index was unchanged at 99.10. WTI crude fell 0.9% (-$0.51) to $55.90/bbl, returning to levels before the drone attack on Saudi Arabia's oil refineries two weeks ago.