Day Traders Diary

2/27/23

The major averages started the week recovering some ground following the worst week of the year on Wall Street. Investors also looked ahead to another big week in retail earnings. The Dow Jones Industrial Average gained 73.78 points to 32889. The S&P 500 rose 12 points or 0.31% to 3,982 while the Nasdaq Composite rose 72 points or 0.63% to 11,466.

The moves came as Treasury yields eased, after the the 2-year rate on Monday hit 4.883%, its highest level since July 2007. It was last trading lower at around 4.782%.

"Because of the renewed focus on hotter inflation and the implications for the Fed, rates are once again driving equities," said Ross Mayfield, investment strategy analyst at Baird. "The rapid shift in Fed funds expectations and the spike in short-term yields has been risk-off in the stock market, so some reprieve on rates today will likely boost equities."

The S&P also got a boost from railroad operator Union Pacific, which climbed 10% after the company announced CEO Lance Fritz will step down this year.

Traders continued to absorb a bigger-than-expected increase in the latest reading for personal consumption expenditures, the Federal Reserve's preferred inflation gauge, which helped sink stocks Friday and push Treasury yields higher.

The early 2023 rally seems to be fading as investors worry that rates could stay higher for longer. The Fed latest meeting minutes showed officials are determined to keep raising rates until inflation comes down.

"A holiday-shortened week was more than enough time for bears to remind everyone that January's rally didn't mean stock-market volatility had been permanently exiled," said Chris Larkin, head of trading and investing at E-Trade. "Investors are coming to grips with rates being higher for longer and Friday's hotter-than-anticipated inflation data effectively confirmed just that."

On the economic data front, durable goods orders fell in January as consumers pulled back spending on big-ticket items.

In earnings, just 6% of the S&P 500 will report but investors are looking for insight into the consumer with several major retailers, restaurants, some travel and entertainment names as well as food companies set to report. Target, Costco, Lowe's and Macy's are some of the big names set to report earnings this week.