Day Traders Diary

1/27/15

The major averages stumbled on Tuesday with the S&P 500 (-1.3%) returning below its 50-day moving average (2,047). The benchmark index settled ahead of the Dow Jones Industrial Average (-1.7%), but behind the Russell 2000 (-0.5%).

Stocks careened lower at the start of today's session after several large companies cautioned that dollar strength will present a headwind to their future earnings. Most notably, Caterpillar (CAT 79.92, -6.11), DuPont (DD 73.18, -0.93), Microsoft (MSFT 42.66, -4.35), and Procter & Gamble (PG 86.49, -3.09) lost between 1.3% and 9.3% while Pfizer (PFE 32.60, -0.20), and United Technologies (UTX 119.16, +0.41) held up relatively well despite their warnings.

However, cautious guidance from six Dow components was not the only issue as investors had to digest a disappointing Durable Orders report while Consumer Confidence and New Home Sales beat expectations.

The Russell 2000 was able to stay ahead of the broader market as domestically-oriented small cap stocks benefitted from having limited exposure to currency fluctuations. Today's outperformance lifted the small-cap index ahead of the S&P 500 for the month of January. The Russell is lower by 0.8% since the end of 2014 while the S&P 500 has surrendered 1.4% so far this month.

Overall, cyclical sectors bore the brunt of today's losses with the top-weighted technology sector tumbling 3.3%. Microsoft's 9.3% decline was a notable drag on the index, but other large cap names also registered losses. Google (GOOGL 521.55, -15.17) and Intel (INTC 34.19, -1.62) lost 2.8% and 4.5%, respectively, while Apple (AAPL 109.13, -3.97) fell 3.5% ahead of its quarterly report. Investors are likely to pay close attention to Apple's guidance to see if the company joins the chorus of influential names voicing concern over greenback strength.

Elsewhere, the industrial sector (-1.3%) was the only other underperformer on the cyclical side, but the group caught up to the S&P 500 just ahead of the close. Caterpillar's 7.2% dive pressured the sector while transport stocks settled just ahead of the broader market. The Dow Jones Transportation Average fell 1.2%.

Over on the countercyclical side, consumer staples (-1.2%) finished in-line with the S&P 500 while health care (-0.8%), telecom services (-1.1%), and utilities (+0.2%) outperformed.

Similar to utilities, the energy sector (-0.2%) spent the day ahead of the broader market with crude oil lending support. The energy component rose 2.3% to $46.21/bbl while the energy sector narrowed its weekly gain to 1.2%.

Treasuries round tripped, spiking in the morning just to spend the remainder of the session in a slide from highs. The benchmark 10-yr yield slipped one basis point to 1.81% after testing the 1.76% level in the morning.

Today's participation was below average with fewer than 700 million shares changing hands at the NYSE floor.

Economic data included Durable Orders, Consumer Confidence, New Home Sales, and Case-Shiller 20-city Index:

Durable goods orders declined 3.4% in December after declining a downwardly revised 2.1% (from -0.9%) while the Briefing.com consensus expected an increase of 0.5% 

A significant portion of the negative surprise came from seasonal adjustments in the aircraft sector. Even though Boeing (BA 132.48, -1.59) reported a positive increase in orders on a month-to-month basis, sales actually declined significantly once seasonal factors were taken into consideration. Aircraft orders declined 46.4% in December, which led to a 9.2% decline in overall transportation orders

Excluding transportation, durable goods orders fell 0.8% in November after declining a downwardly revised 1.3% (from -0.7%) while the Briefing.com consensus expected an increase of 0.7%

New home sales increased 11.6% in December to 481,000 from a downwardly revised 431,000 (from 438,000) while the Briefing.com consensus expected a reading of 450,000

That was the most new homes sold since 487,000 were sold in June 2008

Total sales in 2014 were marginally better than 2013, inching up 1.2% to 435,000 from 429,000 in 2013

The Case-Shiller 20-city Home Price Index for November rose 4.3%, which is what the consensus expected

The Conference Board's Consumer Confidence Index jumped to 102.9 in January from an upwardly revised 93.1 (from 92.6) while the Briefing.com consensus expected an increase to 96.0 

According to the index, consumer confidence is at its strongest level since August 2007 when the index reached 105.6

Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET while the FOMC will release its latest policy directive at 14:00 ET.

Russell 2000 -0.8% YTD

Nasdaq Composite -1.2% YTD

S&P 500 -1.4% YTD

Dow Jones Industrial Average -2.5% YTD