Day Traders Diary

1/2/15

The stock market began 2015 on a cautious note with the major averages surrendering their opening gains. The S&P 500 ended flat while the Dow Jones Industrial Average (+0.1%) settled just above its flat line.

Equity indices started the day with broad-based gains, but the early buying spree ended in a flash. The S&P 500 marked its high 11 minutes after the start of the session before reversing course. The index continued its retreat through the 9:00 ET release of disappointing Construction Spending and ISM reports, and marked its session low shortly after 13:30 ET.

The S&P 500 tried to fight its way back into the green during the afternoon, but losses among influential sectors like consumer discretionary (-0.7%), consumer staples (-0.4%), industrials (-0.2%), and technology (-0.2%) proved too large to overcome.

Notably, the discretionary sector suffered from broad weakness. Homebuilders and retailers lagged with iShares Dow Jones US Home Construction ETF (ITB 25.67, -0.21) and SPDR S&P Retail ETF (XRT 95.34, -0.67) falling 0.8% and 0.7%, respectively. The two groups helped the sector finish at the bottom of the leaderboard.

Elsewhere, industrials contributed to the persistent pressure as transport stocks underperformed. The Dow Jones Transportation Average lost 0.5% with all but five components ending in the red. Shipper Kirby (KEX 81.53, +0.79) outperformed while freight carrier CH Robinson (CHRW 73.84, -1.05) brought up the rear.

Similar to industrials, the technology sector kept the market under pressure during the afternoon. Large cap listings settled in mixed fashion, but Apple (AAPL 109.33, -1.05) fell 1.0%, which contributed to the underperformance of the Nasdaq Composite. However, chipmakers lagged early, but climbed into the afternoon, allowing the PHLX Semiconductor Index to end flat.

On the upside, the utilities sector (+0.6%) ended in the lead, but more notable was the outperformance of health care (+0.4%). The countercyclical group benefitted from daylong strength in biotechnology that sent the iShares Nasdaq Biotechnology ETF (IBB 306.34, +2.99) higher by 1.0%.

Also of note, the energy sector (+0.4%) ended in the green even as crude oil continued its retreat, dropping 1.6% to $52.57/bbl. Greenback strength factored into the move as the Dollar Index jumped 0.9% to 91.12. The dollar picked up about 1.5% against the British pound and 1.0% against the euro, with the latter sliding after a Financial Times op-ed penned by Mario Draghi was viewed as a preamble to a sovereign QE announcement from the European Central Bank.

Treasuries registered solid gains after erasing their overnight losses. The benchmark 10-yr yield fell five basis points to 2.12%.

Participation was in-line with recent totals as 628 million shares changed hands at the NYSE floor.

Economic data was limited to Construction Spending and ISM:

Construction spending in November declined 0.3% from October, which was revised up to show an increase of 1.2% versus 1.1% previously
The November reading was below the Briefing.com consensus estimate, which called for a 0.1% increase
The disappointment was rooted in public construction spending, which declined 1.7% to a seasonally adjusted annual rate of $277.30 billion largely due to a 2.5% pullback in educational construction spending
The ISM Index for December checked in at 55.5, down 3.2 percentage points from the high 58.7 reading in November
The December reading marked the 19th consecutive month of expansion; however, it was weaker than the Briefing.com consensus estimate, which was pegged at 57.5
A number above 50 denotes expansion, so the pullback in December doesn't connote weakness so much as it connotes the manufacturing sector cooling down from a very hot November
Monday's session will be free of economic data.

Dow Jones Industrial Average +0.1% YTD
S&P 500 UNCH YTD
Nasdaq -0.2% YTD
Russell 2000 -0.6% YTD