Day Traders Diary

12/15/14

The major averages began the new week amid some old concerns. The S&P 500 settled lower by 0.6% while the Nasdaq Composite (-1.0%) underperformed, but most of the attention was directed to crude oil trading pits once again.

After plunging nearly 4.0% on Friday and inviting questions about macroeconomic implications of the continued weakness, crude oil enjoyed an overnight rebound before resuming its downtrend. The energy component ended the pit session lower by 3.2% at $55.96/bbl and continued its retreat into the $55.50/bbl area in electronic trade.

Similar to oil, European equities and U.S. equity futures rebounded in overnight action, but accelerated their retreat from highs once the U.S. cash market opened. All ten sectors finished the day in negative territory with heavily-weighted financials (-0.9%), health care (-0.9%), and consumer discretionary (-0.6%) keeping the market under pressure.

Notably, financials and health care finished at the bottom of the leaderboard with the health care sector enduring significant weakness in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 297.66, -8.44) plunged 2.8% and contributed to the underperformance of the Nasdaq.

Although the Nasdaq finished behind the broader market, the tech-heavy index was prevented from sliding deeper into the red by relative strength among some influential components like Accenture (ACN 81.88), Oracle (ORCL 41.11, +1.16), and Qualcomm (QCOM 70.37, -0.21). Of the three, Oracle rallied 2.9% after Morgan Stanley upgraded the stock to 'Overweight.'

Elsewhere, the energy sector (-0.9%) held up well during morning action, but retreated to lows after crude oil locked in a decline for the day. Dow component ExxonMobil (XOM 86.90, +0.30) bucked the trend, climbing 0.4% after BMO Capital Markets upgraded the stock to 'Market Perform' from 'Underperform.'

When the dust settled, the industrial sector (-0.3%) represented the top performer on the cyclical side. The sector benefitted from gains among transport stocks with the group likely responding to cheaper fuel. The Dow Jones Transportation Average ended just above its flat line with Alaska Air (ALK 57.65, +1.84) climbing 3.3%.

Likewise, retailers rallied in response to lower oil prices as evidenced by a 0.2% advance in the SPDR S&P Retail ETF (XRT 92.47, +0.19). However, the broader discretionary sector ended in-line with the market as quick-service restaurants weighed. McDonald's (MCD 88.46, -2.16) and Yum! Brands (YUM 70.63, -2.22) lost 2.4% and 3.1%, respectively.

Treasuries ended the day modestly lower with the 10-yr yield higher by two basis points at 2.12%. On a related note, the Dollar Index registered a slim gain of 0.1%, but the greenback retreated more than 100 pips against the yen to 117.70.

Participation was ahead of average with more than 940 million shares changing hands at the NYSE floor.

Economic data included Empire Manufacturing, Industrial Production, and NAHB Housing Market Index:

The Empire Manufacturing Survey for December registered a reading of -3.6, which was below the prior month's reading of 10.2 and below the Briefing.com consensus estimate, which was pegged at 14.0
Industrial production increased 1.3% in November after increasing an upwardly revised 0.1% (from -0.1%) while the Briefing.com consensus expected an increase of 0.7%
That was the largest increase since a 1.6% gain in May 2010 o Manufacturing production increased a solid, and perhaps unexpected, 1.1% in November after increasing an upwardly revised 0.4% (from 0.2%) in October
Capacity utilization exceeded 80% for the first time since March 2008 and increased to 80.1% in November from 79.3% in October
The NAHB Housing Market Index for December slipped to 57 from 58 while the Briefing.com consensus expected the reading to hold at 58
Tomorrow, November Housing Starts (Briefing.com consensus 1.035 mln) and Building Permits (consensus 1.06 mln) will be reported at 8:30 ET.

Nasdaq Composite +10.3% YTD
S&P 500 +7.6% YTD
Dow Jones Industrial Average +3.6% YTD
Russell 2000 -1.8% YTD

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