Day Traders Diary

1/21/15

Equity indices enjoyed their third consecutive advance on Wednesday with the S&P 500 climbing 0.5%.

The highly-anticipated policy meeting at the European Central Bank will take place tomorrow morning, but that did not stop the Wednesday session from being filled with central bank-related storylines. The Bank of Japan got the ball rolling overnight by lowering its inflation outlook to 1.0% from 1.7%, which boosted the yen (117.80).

The Bank of England was next on tap with the minutes from its latest policy meeting. The minutes were a bit surprising as Messrs. McCafferty and Weale, who previously voted in favor of rate hikes, rejoined the majority in their belief that hiking rates too early would prolong the period of low inflation. The newfound dovish tilt at the BoE helped UK's FTSE spike 1.6% to outperform the region.

Meanwhile, other European indices struggled in the early going after ECB governing council member Ewald Nowotny said policymakers should maintain their long-term perspective and that "one should not get overexcited" about [the meeting].

Mr. Nowotny's remarks contributed to a cautious start in the U.S., but global equities jumped off their lows in reaction to reports indicating the European Central Bank is set to propose EUR50 billion in asset purchases through 2016. The euro wobbled on the news before ending the day near 1.1590 against the dollar. In a surprising move, Germany's 10-yr note tumbled, sending the benchmark yield higher by seven basis points to 0.47%.

The Bank of Canada completed the central bank bonanza with a surprise 25-basis point cut to 0.75% in response to crashing oil prices, which are expected to put downward pressure on Canadian inflation. The loonie retreated to its lowest level since early 2009, sending USDCAD to 1.2330 from 1.2070.

All ten sectors registered gains with energy (+1.8%) maintaining the lead throughout the session. The recently-batter sector was able to trim its January loss to 2.8% with help from crude oil, which spiked 2.7% to $47.78/bbl. Another commodity-related sector—materials (+1.0%)—followed not far behind with steelmakers underpinning the move. The Market Vectors Steel ETF (SLX 33.38, +0.68) gained 2.1%.

Elsewhere, the remaining cyclical sectors ended mixed with respect to the broader market. Industrials (+0.7%) and consumer discretionary (+0.6%) outperformed with the latter receiving a boost from above-consensus earnings reported by Netflix (NFLX 409.28, +60.48).

On the flip side, financials (+0.2%) and technology (+0.2%) spent the day among the laggards. The tech sector could not keep pace with the market due to a 3.1% loss in the shares of IBM (IBM 152.09, -4.86) after the Dow component missed revenue estimates and issued disappointing guidance. However, chipmakers rallied behind better than expected results from ASML (ASML 106.59, +2.78) and Cree (CREE 33.88, +1.54). The broader PHLX Semiconductor Index advanced 1.1%.

Over on the countercyclical side, the utilities sector (+1.0%) extended its January advance to 4.3% while consumer staples (+0.3%), telecom services (+0.2%), and health care (+0.1%) underperformed.

Treasuries notched their highs in the morning before giving up those gains in early afternoon action. As a result, the 10-yr yield jumped six basis points to 1.86%.

Participation was a bit below average with roughly 750 million shares changing hands at the NYSE floor.

Economic data was limited to Housing Starts/Building Permits and the MBA Mortgage Index:

Led by a large increase in single-family construction, new housing starts increased 4.4% in December to 1.089 million from an upwardly revised 1.043 million (from 1.028 million) in November 

The Briefing.com consensus pegged new housing starts at 1.040 million

Single-family construction increased 7.2% to 728,000 from 679,000 in November, representing the largest number of single-family starts January 2008 (773,000)

Building permits fell to a seasonally adjusted annualized rate of 1.032 million versus a revised 1.052 million for November (from 1.035 million) 

The Briefing.com consensus expected permits to come in at 1.060 million

The weekly MBA Mortgage Index spiked 14.2% to follow last week's 49.1% surge

Tomorrow, weekly Initial Claims will be released at 8:30 ET (Briefing.com consensus 302,000) while the FHFA Housing Price Index for November will cross the wires at 9:00 ET.

Dow Jones Industrial Average -1.5% YTD

Nasdaq Composite -1.5% YTD

S&P 500 -1.3% YTD

Russell 2000 -3.2% YTD