When everything seemingly back on track, Trump had just the words to say to get the market back into a funk. We can’t reiterate enough one of the day trading basics for beginners: it doesn’t matter how good the market’s fundamentals are or how well a company may be positioned to capitalize on those fundamentals. When a sector faces crosswinds, it sends all of the sector’s stocks into a tizzy. Any day trading training course will hone in that principle. Whereas, as an investor it may be good to be a non-conformist, to go against the grain, to buy when others are selling and sell when others are buying, as a day trader, you don’t want to be a salmon swimming upstream! Keep your finger on the pulse of the market; if a whole sector tanks, you sell short; you don’t start looking for untapped value. More on that later…

Yesterday, it was the industrial powerhouse, Boeing (BA), which saw the largest losses. The stock plunged 2.5%, Caterpillar falling a full 1.7%. 3M (MMM) was off 1.4%. The three were some of the biggest losers on the blue-chip Dow and the S&P 500.

Retailers were also in the spotlight – and big time! J.C. Penney (JCP) for years has been trying to make an impressive turnaround and in large respects, it succeeded in shoring up its finances. And then the bombshell came yesterday; its CEO had been courted by Lowe’s and had decided to jump ship. Ironically, both companies fell, JCP tanking 6% and LOW shedding 1.9%. Also on the retail front, Kohl’s (KSS) fell 7.4%, even though its earnings beat the consensus and its outlook was upbeat. TJX Companies (TJX) beat the odds, up 3.3% after the retailer beat out the market’s quarterly earnings projections.

There were big winners out there, too. Micron Technology (MU) soared 6.4% after the semiconductor company announced that it planned on buying back roughly 15% of its outstanding shares, in lieu of giving the money back to investors in the form of dividends. Analysts upped their targets on the stock. Things could not have looked better for the company. Simply put, in the words of Needham’s analyst, Rajvindra Gill: “This buyback announcement is important for two reasons: 1) it signifies to the Street that management believes the shares are undervalued (choosing buyback instead of dividend) and 2) coincides with the structural changes occurring in the memory industry and at Micron.” And if you’ve gone the distance with the stock, holding it from the start of the year, you’d be ecstatic. Up 43.6% year to date, and 112.2% in the past 12 months, there’s reason enough to be happy. Chip makers, too, got a nice boost, the PHLX Semiconductor index (SOX) tacking on 0.6% on the day.

AutoZone (AZO), had the not so nice distinction of being the worst-performing stock on the S&P 500. Its Q3 report disappointing, the stock plummeted 9.5%, ending the day at $602. More than anything, though, it was management’s commentary that created downward pressure. Rising labor costs and reinvestment in the business are things that investors rarely want to hear! What they want is dividends – that, or buybacks, and when investors don’t get what they want, they vote with their feet. The stock’s weakness spread beyond, weighing on Advanced Auto Parts (AAP) as well. Some, including Wells Fargo analyst, Zachary Fadem, thought that the response to AZO results was exaggerated. “AZO post-Q3 sell-off smells overdone,” he predicted a buying opportunity.

What risk is the market facing now? In the words of Todd Market Forecast’s Stephen Todd: “Geopolitics again seemed to be the main factor in the market action on Tuesday. In a press conference with South Korea’s President Moon, President Trump suggested that the summit with Kim Jong Un could be on hold or at least delayed.” And what response did that engender, how did the market respond?! Traders ran for cover. Bids removed, traders looked for safer shores.

Economic Diary: MBA Mortgage Applications will be coming out at 7:00, the PMI Composite Flash at 9:45. Then the New Home Sales report will be released at 10:00. And if you want a real trading challenge, carefully monitor the EIA Petroleum Status Report at 10:30. With crude prices having risen as much as they have, this report will be critical in terms of traders’ perception of supply and demand. Live trading at its best, the price of crude affects many industries, from airlines to car manufacturers, so be primed for volatility today. The FOMC minutes will be released at 14:00. Getting back to fundamentals, a day trading basics for beginners: When the Fed talks, listen! We can’t accentuate that enough.

More than anything, in the words of the Oracle of Omaha, Warren Buffett, what determines the desirability of stocks is the interest rate. If you can get more money by putting your money in the bank risk-free, why put it in a market wrought with fears. From inflation to geopolitical concerns, this market has not proven an easy one to trade so if the minutes signal a faster clip of rate hikes, beware! In the words of Buffett himself: “The most important item over time in valuation is obviously interest rates.” What could be a better introduction to day trading! Like in basketball, always keep your eye on the ball. A la Buffett: “If interest rates are destined to be at low levels. … It makes any stream of earnings from investments worth more money. The bogey is always what government bonds yield.”

Market Summary: The blue-chip Dow was down 0.72%, the S&P 500 shedding 0.31%. The NASDAQ was least scathed, with losses of 0.21%. Most sectors on the S&P 500 ended the day off. Over the last 5 days, the IT sector has seen the best performance, with gains of 1.40%. Yesterday, industrials took the biggest hit after Trump’s rhetoric about China, dropping 0.91%. Energy stocks fell 0.85%, materials shedding 0.57%.

Hot Stocks: MU, CTRP, TCS, RRGB, INTU, AZO

IndexLast

Daily change

DJX24,834-178.88-0.72%
SPX2,724-8.57-0.31%
NASDAQ7,378-15.58-0.21%

Have a great trading day!