Day Traders Diary

1/7/15

The major averages rebounded from their recent swoon with the S&P 500 (+1.2%) posting its first gain in six sessions. The benchmark index settled just behind the Nasdaq Composite (+1.3%) while the Dow Jones Industrial Average (+1.2%) and Russell 2000 (+1.2%) ended in-line with the S&P 500.

The midweek advance occurred in two stages with the market climbing out of the gate amid upbeat action overseas. The S&P 500 notched its morning high 30 minutes after the opening bell, but returned to its opening level two hours after the start of the session. Equity indices then charged to new highs after Bloomberg reported that German officials are expected to show willingness to restructure Greek debt. The report said that a debt write-off is not being discussed, but repayment terms may be eased.

Stocks caught a second wind following the Bloomberg report and spent the remainder of the session near their afternoon highs, all but ignoring the FOMC minutes from the December meeting. The lack of reaction was understandable, considering the document did not introduce anything 'new' in particular.

According to the minutes, the Fed's intent to be 'patient,' which was announced by Janet Yellen in the December press conference, means that a rate hike will not occur in the next couple of meetings.

Nine of ten sectors ended in the green with health care (+2.3%) spending the entire session in the lead. The countercyclical sector was underpinned by biotechnology with the iShares Nasdaq Biotechnology ETF (IBB 312.00, +11.19) surging 3.7%. The strong showing from the high-beta group kept the Nasdaq ahead of S&P 500 for the bulk of the session. Meanwhile, top-weighted technology names were not as strong. Apple (AAPL 107.75, +1.49) and Microsoft (MSFT 46.23, +0.58) posted solid gains while Google (GOOGL 505.15, -1.49) and IBM (IBM 155.05, -1.02) could not stay out of the red, resulting in daylong underperformance from the technology sector (+0.9%).

As for the remaining cyclical groups, consumer discretionary (+1.5%) was the only growth-sensitive sector able to finish ahead of the broader market thanks to broad support. Retailers climbed with the SPDR S&P Retail ETF (XRT 95.70, +2.44) adding 2.6% while homebuilders had an even stronger showing. The iShares Dow Jones US Home Construction ETF (ITB 25.93, +0.82) spiked 3.3%.

Elsewhere, the energy sector (+0.3%) was among the early leaders, but finished the day just north of its low. For its part, crude oil alternated between gains and losses before ending the pit session higher by 1.5% at $48.70/bbl.

On the downside, the telecom services sector (-1.4%) represented the lone decliner, spending the entire session in negative territory.

Treasuries ended the day in the middle of their range with the 10-yr yield up one basis point at 1.96% after marking an intraday high just above 2.00%. The benchmark note climbed after the release of the FOMC minutes, suggesting fixed income traders were not concerned with a possibility of a swift rate hike.

Participation was just short of recent averages with 758 million shares changing hands at the NYSE floor. Economic data released this morning was limited to ADP Employment, Trade Deficit, and the MBA Mortgage Index:

The ADP National Employment Report revealed that employment in the nonfarm private business sector rose 241K in December while the Briefing.com consensus expected an increase of 230K
The November reading was revised up to 227,000 from 208,000
The U.S. trade deficit declined to $39.00 billion in November from a downwardly revised $42.20 billion (from $43.40 billion) in October while the consensus expected a decline to $41.80 billion
That was the smallest trade deficit since December 2013 (-$37.40 billion)
Even though U.S. petroleum producers have increased their exports of petroleum-based products over the last few years, the U.S. is still a net importer of crude products. The fall in oil prices had a larger impact in lowering total imports than reducing exports, which led to the smaller trade deficit in November.
The MBA Mortgage Index, which was not reported last week, rose 11.1%, but fell 9.1% over the two-week period since the last update
Tomorrow, the Challenger Job Cuts report for December will be released at 7:30 ET while weekly Initial Claims will be reported at 8:30 ET (Briefing.com consensus 290K). The day's data will be topped off with the November Consumer Credit report (consensus $15.00 billion), which is slated for a 14:00 ET release.

Dow Jones Industrial Average -1.3% YTD
S&P 500 -1.6% YTD
Nasdaq Composite -1.8% YTD
Russell 2000 -2.4% YTD