Day Traders Diary

1/22/15

The major averages registered their fourth consecutive advance on Thursday with the S&P 500 (+1.5%) reclaiming its 50-day moving average (2046/2047). The benchmark index erased its January loss while the Russell 2000 (+2.0%) displayed relative strength throughout the day.

This week has featured action from several major central banks and that extravaganza was topped off today when the European Central Bank announced the highly-anticipated launch of a quantitative easing program.

Prior to the U.S. open, ECB President Mario Draghi revealed plans to purchase investment-grade corporate and government debt in the amount of EUR60 billion per month. According to Mr. Draghi, the program will continue through September 2016 and will be deployed 'decentrally,' meaning national central banks will participate in the risk sharing. When asked about the program's limits, Mr. Draghi said the take-up is limited to 25.0% of a given issue. The announcement boosted European debt (Italy 10-yr yield -14 bps to 1.55%) and weighed on the euro, sending the single currency lower by nearly 300 pips to 1.1340 against the dollar.

The resulting greenback strength pushed the Dollar Index (94.28, +1.37) above the 94.00 level for the first time since September 2003. In turn, this was a headwind for dollar-denominated commodities, and especially crude oil, which also had to contend with a larger than expected inventory build. The energy component fell 2.9% to $46.38/bbl while the energy sector (+0.6%) registered a modest gain after spending the first half of the session in negative territory.

Similar to energy, the materials sector (+1.3%) underperformed while the remaining cyclical groups finished ahead of the broader market.

The financial sector (+2.5%) settled in the lead, but the spike could not lift the group off the bottom of the January leaderboard. The sector narrowed its month-to-date loss to 2.9% while Dow components American Express (AXP 84.37, -3.30) and Travelers (TRV 108.17, +3.16) headed in opposite direction following earnings. American Express lost 3.8% after the company beat top-line estimates and announced plans to cut 4,000 jobs whereas Travelers rallied 3.0% in reaction to better than expected earnings.

Financials were followed by discretionary shares (+1.9%) with the group enjoying broad support. Online commerce names Amazon.com (AMZN 310.32, +13.07) and eBay (EBAY 57.14, +3.77) posted respective gains of 4.4% and 7.1% after eBay reported a one-cent beat and announced plans for a 7.0% reduction of the company's workforce. It is also worth mentioning the company agreed to appoint an Icahn Capital executive to its Board of Directors.

Elsewhere, the top-weighted tech sector (+2.0%) displayed broad strength while the PHLX Semiconductor Index (+0.6%) struggled to keep pace due to disappointing guidance from Xilinx (XLNX 38.96, -2.55) and SanDisk (SNDK 78.90, -1.54). The pair lost 6.1% and 1.9%, respectively.

Also of note, the industrial sector (+1.6%) finished just ahead of the broader market, but transport stocks soared following better than expected results from Alaska Air (ALK 67.94, +2.96), Southwest Airlines (LUV 45.35, +3.52), JB Hunt (JBHT 84.23, +2.19), and Union Pacific (UNP 119.83, +5.43). The Dow Jones Transportation Average spiked 2.9% to erase its January decline.

Unlike the six cyclical sectors, defensively-oriented groups spent the day behind the market. Telecom services (-0.6%) and utilities (-0.4%) could not stay out of the red while consumer staples (+1.1%) and health care (+1.3%) ended in the green.

Treasuries finished with slim losses that sent the 10-yr yield higher by a basis point to 1.88%.

Today's participation was ahead of average with roughly 871 million shares changing hands at the NYSE floor.

Economic data was limited to Initial Claims and the FHFA Housing Market Index:

The initial claims level declined to 307,000 from an upwardly revised 317,000 (from 316,000) while the Briefing.com consensus expected a decline to 302,000 

This was the first time since July 2014 that the initial claims level exceeded 300,000 for three consecutive weeks 

As with last week, the Department of Labor reported that there were no special factors impacting the initial claims level 

Continuing claims increased to 2.443 million from an upwardly revised 2.428 million (from 2.424 million) 

The FHFA Housing Price Index for November rose 0.8%, which followed an increase of 0.6% in October 

Tomorrow's data will be limited to Existing Home Sales for December (Briefing.com consensus 5.10 million) and December Leading Indicators (consensus 0.5%). Both reports will be released at 10:00 ET.

Nasdaq Composite +0.3% YTD 

S&P 500 +0.2% YTD 

Dow Jones Industrial Average -0.1% YTD 

Russell 2000 -1.2% YTD