Day Traders Diary

1/30/15

The stock market ended a down month on a sharply lower note. The Dow (-1.5%) and S&P 500 (-1.3%) widened their respective January losses to 3.7% and 3.1% while the Nasdaq Composite (-1.0%) lost 2.1%. Furthermore, this marked the first time since early 2012 that the market registered losses in two consecutive months.

The key indices struggled at the start after a disappointing GDP report for the fourth quarter introduced a new wrinkle into a deteriorating outlook for global growth. Overnight, Japan and the eurozone saw a slowdown in their respective inflation data while a handful of U.S. companies joined a growing chorus of names that have reduced their guidance for the first quarter. On that note, consensus Q1 earnings growth has contracted to just 0.2% from 8.6% on December 1, according to S&P Capital IQ.

Equities followed their lower open with another slip, but the S&P 500 turned around just north of the 2,000 level and spent the afternoon working back to its flat line. The rebound coincided with a Der Spiegel report indicating Germany is ready to back EUR20 billion in aid for Greece, but the package would be contingent on Greece accepting reform conditions imposed by the troika. This contrasted with earlier comments from Greek Finance Minister Yanis Varoufakis who said Greece will no longer negotiate with the troika. Furthermore, Germany's government was quick to deny the report from Der Spiegel.

The afternoon rebound also featured a surge in crude oil, which spiked to end the day higher by 8.0% at $48.17/bbl. However, crude notched its high just ahead of the 14:30 ET pit close and inched away from that level in electronic trade while the S&P 500 slumped back below its 100-day moving average (2,010) to a new low.

Nine of ten sectors registered losses while energy (+0.7%) benefitted from the spike in crude. However, today's surge was a small victory considering the sector lost 4.9% in January. Dow component Chevron (CVX 102.53, -0.47) shed 0.5% after its plans to cut capital expenditures by 13.0% overshadowed better than expected results.

Speaking of the Dow, the index stayed near the S&P 500, but a 2.8% spike in the shares of Visa (V 254.91, +6.91) masked the fact that 15 of 30 Dow members lost more than 2.0% while four of the 15 tumbled 3.0% or more. As for Visa, the payment processor spiked after beating estimates and announcing a 4:1 split, which will become effective March 19 and remove some of Visa's influence over the price-weighted index.

In other earnings of note, Amazon.com (AMZN 354.53, +42.75) soared 13.7% after beating operating income estimates and issuing cautious guidance for the first quarter. The stock helped the consumer discretionary sector (-1.1%) finish a few steps ahead of the broader market.

Although the market endured a whipsaw session, that was not the case with Shake Shack (SHAK 45.90, +24.90), which made its public debut today. Shares of the hamburger chain rocketed higher by 118.6% after pricing the IPO at $21.

Treasuries spiked, ending near their highs with the 10-yr yield down eight basis points at 1.67%.

Today's participation was well ahead of average with more than a billion shares changing hands at the NYSE floor.

Economic data included Q4 GDP, Employment Cost Index, Chicago PMI, and Michigan Sentiment:

According to the advance estimate, GDP increased 2.6% in Q4 2014 (Briefing.com consensus 3.2%), down from a 5.0% increase in the third quarter 

Real final sales increased 1.8% in the fourth quarter after increasing 5.0% in the third quarter

Much of the GDP gain was the result of lower prices adding a boost to the "real" economy. Nominal GDP growth was anemic (2.5%), which was down by more than 50% from both second (6.8%) and third quarter (6.4%) growth levels

Consumption spending was a bright spot, increasing 4.3%, which was the largest jump since 2006

The Employment Cost index Increased 0.6% in Q4, down from a 0.7% increase in Q3 while the Briefing.com consensus expected an increase of 0.5% 

Wages and salaries decelerated, up 0.5% after increasing 0.8% in Q3 2014

Benefits spending growth increased 0.6% for a second consecutive quarter

The Chicago PMI for January increased to 59.4 from 58.8 while the Briefing.com consensus expected a drop to 58.0 

Production levels accelerated as the related index increased to 64.1 in January from 62.7 in December

The University of Michigan Consumer Sentiment Index was virtually unchanged in January, ticking down to 98.1 from 98.2 (Briefing.com consensus 98.2) 

Lower gasoline prices and improvements in the labor market were key for overall sentiment growth in January

On Monday, December Personal Income, Personal Spending, and Core PCE Prices will be reported at 8:30 ET while the ISM Index for January and December Construction Spending will be released at 10:00 ET.

Nasdaq Composite -2.1% YTD

S&P 500 -3.1% YTD

Russell 2000 -3.4% YTD

Dow Jones Industrial Average -3.7% YTD