Day Traders Diary

12/17/14

The stock market ended the Wednesday session with solid gains that were paced by the Russell 2000. The small-cap index jumped 3.1% while the S&P 500 settled higher by 2.0% with all ten sectors registering gains.

Equities climbed through the first half of action and saw an extension of their rally in the afternoon once the FOMC released its latest policy directive.

As expected by some, the Fed removed the "considerable time" language from its policy statement, but that reference was replaced with a call for "patience," which essentially conveyed the same message. Above all, Chair Yellen reiterated that the central bank will remain data-dependent and reserves the right to accelerate, or defer, a rate hike in accordance with what the data are communicating about the progress being made toward the Fed's dual mandate.

With regard to inflation, Ms. Yellen touched on the drop in oil prices during her press conference, but showed little concern, saying the decline is expected to be transitory.

The policy statement was followed by volatile action in the bond market, but Treasuries slid to lows into the close. The benchmark 10-yr yield spiked eight basis points to 2.14%.

As for equities, the energy sector (+4.2%) paced the advance and ended near its high even as crude oil slumped into the close, ending higher by 1.0% at $56.44/bbl.

The energy sector was followed by the materials space (+2.8%), which benefitted from gains among miners and steelmakers. The Market Vectors Gold Miners ETF (GDX 17.98, +0.88) and Market Vectors Steel ETF (SLX 35.31, +1.27) ended higher by 5.2% and 3.7%, respectively.

Outside of the two commodity-related groups, the financial sector (+2.3%) represented the only other outperformer on the cyclical side. Influential sector components fueled the strength with Bank of America (BAC 17.26, +0.54) and JPMorgan Chase (JPM 59.77, +1.34) posting respective gains of 3.2% and 2.3%.

Elsewhere, the industrial sector (+0.9%) climbed out of the red after the FOMC statement, but the sector could not keep pace with the broader market amid relative weakness in transport stocks. FedEx (FDX 167.78, -6.48) tumbled 3.7% after missing estimates while peers Expeditors International (EXPD 43.28, -0.98) and UPS (UPS 108.55, -1.28) lost 2.2% and 1.2%, respectively. However, rail carriers CSX (CSX 35.77, +1.10) and Union-Pacific (UNP 114.89, +2.69) helped the Dow Jones Transportation Average end higher by 0.9%.

Today's participation was ahead of average with more than a billion shares changing hands at the NYSE floor.

Economic data included CPI, Core CPI, Q3 Current Account, and MBA Mortgage Index:

Consumer prices declined 0.3% in November after being unchanged in October, which was the biggest decline since CPI fell 0.8% in December 2008
The Briefing.com consensus expected a decline of 0.1%
The entire decline in prices can be attributed to the energy sector. Energy prices fell 3.8% in November, marking the fifth consecutive monthly decline and the largest drop since falling 9.5% in December 2008
Gasoline prices fell 6.6% after declining 3.0% in October
Food prices increased 0.2% in November, up from a 0.1% gain in October
Excluding food and energy, core CPI increased 0.1% in November, down from a 0.2% gain in October, while the consensus expected an increase of 0.1%
The current account deficit for the third quarter totaled $100.30 billion while the Briefing.com consensus expected the deficit to hit $95.00 billion
The second quarter deficit was revised down to $98.40 billion from $98.50 billion
The weekly MBA Mortgage Index fell 3.3% to follow last week's 7.3% spike
Tomorrow, weekly Initial Claims (Briefing.com consensus 292K) will be released at 8:30 ET while November Leading Indicators (consensus 0.5%) and the Philadelphia Fed Survey for December (consensus 26.0) will cross the wires at 10:00 ET.

Nasdaq Composite +11.2% YTD
S&P 500 +8.9% YTD
Dow Jones Industrial Average +4.7% YTD
Russell 2000 +0.9% YTD

All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.