Day Traders Diary

1/14/15

The major averages endured their fourth consecutive decline with the S&P 500 (-0.6%) making an intraday appearance below its 100-day moving average (2,007). The tech-heavy Nasdaq outperformed, but still lost 0.5%.

Equities faced selling pressure from the start after the overnight session failed to alleviate the growth concerns that contributed to the recent weakness. Instead, the concerns grew larger, starting with the World Bank's reduced growth outlook for 2015 (to 3.0% from 3.4%) and 2016 (to 3.3% from 3.5%).

The lowered outlook pressured commodities, and especially copper, which remained under pressure throughout the day, ending lower by 4.9% at $2.51/lb after hitting a low near the $2.45/lb level. Crude oil, however, traded in the red during morning action, but rocketed into the pit close, which helped the broader market climb off its intraday low. As for crude, the energy component spiked 5.7% to $48.55/bbl.

The rebound in crude helped the energy sector (+0.1%) finish in the green, but other cyclical groups did not fare as well. Notably, the financial sector (-1.4%) ended at the bottom of the leaderboard, which was largely due to a 3.5% decline in JPMorgan Chase (JPM 56.81, -2.03) after the industry giant reported below-consensus earnings and revenue. For its part, Wells Fargo (WFC 51.25, -0.60) delivered an in-line report, but still lost 1.2%.

Financials inched away from their lows during afternoon action, but could not catch up to the broader market, which was also the case with the consumer discretionary sector (-1.2%). The fourth-largest sector by weight retreated following the disappointing December Retail Sales report (-0.9%; Briefing.com consensus 0.1%) while homebuilders lagged early, but ended just ahead of the broader market with the iShares Dow Jones US Home Construction ETF (ITB 25.90, -0.09) falling 0.4%.

Elsewhere among cyclical sectors, technology (-0.5%) finished just ahead of the broader market while chipmakers kept pace with the S&P 500. Shares of BlackBerry (BBRY 12.60, +2.88) spiked almost 30.0% in afternoon action after Reuters reported the company has been approached by Samsung about a potential takeover.

Unlike cyclical sectors, the four defensively-oriented groups spent the day ahead of the broader market. Health care (-0.1%) settled just below its flat line while the iShares Nasdaq Biotechnology ETF (IBB 315.57, +0.60) added 0.2%. The utilities sector (+0.9%) was the lone advancer on the countercyclical side, extending its January advance to 1.4%.

Treasuries jumped following this morning's data before surrendering a portion of their gains. The 10-yr yield fell six basis points to 1.84%. Also of note, the 30-yr yield ended at 2.45% (-3 bps), which represented the lowest close on record.

Today's participation was ahead of average with more than 900 million shares changing hands at the NYSE floor.

Economic data included Retail Sales, Import/Export Prices, Business Inventories, and the MBA Mortgage Index:

Retail sales fell 0.9% in December after increasing a downwardly revised 0.4% (from 0.7%) in November, while the Briefing.com consensus expected an increase of 0.1%. 

The sharp pullback in sales was a direct result of poor income growth. The December employment report showed a contraction in the average hourly wage, which resulted in flat aggregate income growth after accounting for payrolls gains

Without income growth, the only way for sales to improve was for consumers to dip into their savings. Households have been very reluctant to do so, which meant retail sales were poised for a pullback in December

Excluding motor vehicles, sales declined 1.0% after increasing a downward revised 0.1% (from 0.5%) in November 

The consensus expected these sales to increase 0.1%

Export prices, excluding agriculture, decreased 1.2% in December after decreasing 1.2% in the prior reading 

Excluding oil, import prices ticked down 0.1%, which followed last month's 0.3% decline

Business Inventories rose 0.2% in November, while the Briefing.com consensus expected an increase of 0.3% 

The prior month's reading was left unrevised at +0.2%

The weekly MBA Mortgage Index saw its biggest spike since November 2008, surging 49.1% to follow the previous 11.1% spike

Tomorrow, weekly Initial Claims (Briefing.com consensus 290K), December PPI (consensus -0.4%), and January Empire Manufacturing Survey (expected 6.5) will be released at 8:30 ET while the Philadelphia Fed Survey for January (consensus 19.0) will cross at 10:00 ET.

Russell 2000 -2.4% YTD

S&P 500 -2.3% YTD

Dow Jones Industrial Average -2.2% YTD

Nasdaq Composite -2.0% YTD