Day Traders Diary

1/6/15

Equity indices ended the Tuesday session in the red with the Russell 2000 (-1.7%) pacing the retreat. Meanwhile, the S&P 500 lost 0.9% with eight sectors registering losses.

The stock market held up relatively well through the first hour of action, but the return of some recent concerns pressured cyclical sectors and the broader market into negative territory. Specifically, the S&P 500 reversed from its session high after The Financial Times reported, citing Oxford Economics research, that Syriza party in Greece is on track to win enough votes that would translate into a mandate to push back against austerity policies imposed by the European Union. In addition to hitting U.S. stocks, the news knocked European markets off their highs and set a fire under U.S. Treasuries. The resulting safe-haven flows underpinned Treasuries, sending the benchmark 10-yr yield lower by seven basis points to 1.96% after marking a low just under the 1.89% level.

However, the market had more to contend with than just the update regarding Greece. Namely, crude oil continued its sharp downtrend while fund manager Bill Gross of Janus Capital published his investment outlook for 2015, which revealed that Mr. Gross expects negative returns from 'many' asset classes. This disclosure wasn't entirely new, considering Mr. Gross was quoted by Reuters yesterday as saying "Be prepared for low returns in almost all asset categories."

As for oil, the energy component was little changed in early overnight action, but began slipping just ahead of the opening bell in Europe. Crude was unable to pull away from its overnight low, extending its decline to 4.0% at $48.10/bbl. The commodity ended the pit session down 10.5% from its 2014 close.

Meanwhile, the energy sector (-1.3%) settled near the bottom of the leaderboard, only ahead of financials (-1.5%). Major energy components like ConocoPhillips (COP 62.93, -2.71), EOG Resources (EOG 84.20, -2.48) and Schlumberger (SLB 81.72, -1.63) lost between 2.0% and 4.1% while Dow members Chevron (CVX 108.03, -0.05) and ExxonMobil (XOM 89.81, -0.48) outperformed.

Elsewhere, the industrial sector (-0.9%) also spent the day among the laggards. For the second day in a row, transport stocks were partially responsible for the underperformance as the Dow Jones Transportation Average lost 1.7%. FedEx (FDX 169.79, -0.01) was unable to hold its intraday gain, ending flat, after UBS upgraded the logistics company to 'Buy.' As for the Transportation Average, the bellwether complex is now down 4.3% after the first two sessions of the week.

The S&P 500 was able to reclaim about a third of its decline during afternoon action with countercyclical sectors lending some support. Consumer staples (unch) and health care (-0.3%) outperformed while the two smallest sectors by weighttelecom services (+0.4%) and utilities (+0.1%)spent the bulk of the session in positive territory.

Today's participation was well ahead of average with more than 915 million shares changing hands at the floor of the New York Stock Exchange.

Economic data was limited to Factory Orders and ISM Services:

Factory orders posted their fourth consecutive monthly decline, falling 0.7% in November which was worse than the 0.4% decline expected by the Briefing.com consensus
The October reading was left unrevised at -0.7%
Orders for durable goods declined 0.9%, which was more than a previously reported 0.7% decline. Nondurable goods orders, meanwhile, declined 0.5%
Shipments, which factor into GDP growth, declined 0.6% in November on top of a 0.9% decline in October
The ISM Services Index for December fell to 56.2 from 59.3 while the Briefing.com consensus expected a downtick to 58.5
The dip in December was driven by a pullback in all index categories with two indices falling into contraction:
Backlog of Orders Index fell to 49.5 from 55.5
Prices Index fell to 49.5 from 54.4
Tomorrow the weekly MBA Mortgage Index will be released at 7:00 ET while the December ADP Employment Change report (Briefing.com consensus 230K) will cross the wires at 8:15 ET. The November trade deficit (consensus $41.80 billion) will be reported at 8:30 ET while the FOMC Minutes from the December meeting will be released at 14:00 ET.

Dow Jones Industrial Average -2.5% YTD
S&P 500 -2.7% YTD
Nasdaq Composite -3.0% YTD
Russell 2000 -3.6% YTD