Day Traders Diary

2/3/15

The stock market registered its second consecutive advance with the S&P 500 climbing 1.4% to retake its 50-day moving average (2,044). The price-weighted Dow (+1.8%) fared a bit better while the Nasdaq Composite (+1.1%) underperformed.

Equities displayed strength from the get-go after markets in Europe responded positively to a Financial Times report suggesting Greece will soften its negotiating stance; however, Finance Minister Yanis Varoufakis said there has been no 'U-turn' in Greece's position while German Chancellor Angela Merkel has set expectations for a drawn out process, saying the ongoing talks will 'drag on for months.' In addition, a handful of German lawmakers have voiced their displeasure with the position being assumed by Greece. With no resolution in sight, another chapter in the European saga will be written tomorrow when Mr. Varoufakis meets with European Central Bank President Mario Draghi in Frankfurt.

For the time being, the market happily continued retracing its losses from January. The S&P 500 narrowed its quarter-to-date decline to 0.4% with all ten sectors ending in the green.

Once again, the energy sector (+2.8%) held the lead throughout the session with help from crude oil, which soared 7.0% to $53.04/bbl. In all likelihood, a short squeeze contributed to the surge, but so did better than expected earnings from BP (BP 41.10, +1.24). However, it is worth mentioning that the industry giant plans to cut its 2015 capital expenditure budget by 13.0% to $20 billion.

Similar to energy, materials (+2.2%) and consumer discretionary (+2.2%) jumped more than 2.0% while two of the remaining three cyclical groups also finished ahead of the broader market.

The discretionary sector received broad support with Office Depot (ODP 9.27, +1.64) charging higher by 21.5% after The Wall Street Journal reported the company has been in talks with Staples (SPLS 19.01, +1.87) about a potential merger.

Elsewhere, the technology sector (+1.0%) lagged throughout the session, but was able to settle not far behind the broader market. Chipmakers displayed relative strength (PHLX Semiconductor Index +1.8%), but several top-weighted components like Apple (AAPL 118.57, -0.06), Facebook (FB 75.40, +0.41), and Google (GOOGL 533.30, +1.10) struggled to pull away from their flat lines.

Similar to the tech sector, the Nasdaq spent the day behind the broader market. Biotechnology factored into the underperformance with the iShares Nasdaq Biotechnology ETF (IBB 317.79, -1.79) falling 0.6% while the health care sector (+0.7%) settled near the bottom of the leaderboard.

Treasuries spent the day in a steady retreat, sending the 10-yr yield higher by 11 basis points to 1.78%.

Today's participation was well above average with more than 958 million shares changing hands at the NYSE floor.

Economic data was limited to Factory Orders:

Factory orders declined 3.4% in December after declining a downwardly revised 1.7% (from -0.7%) in November while the Briefing.com consensus expected a drop of 2.0% 

While the headline decline in factory orders was clear miss in terms of expectations, the underlying data should provide a boost to the second estimate to Q4 2014 GDP

Shipments of nondefense capital goods, excluding aircraft, were much stronger than reported in the advance release. Instead of declining 0.2% in December, shipments increased 0.2%. Since shipments factor into GDP calculations, the upward revision will positively contribute to economic growth

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while the ADP Employment Change for January will cross the wires at 8:15 ET (Briefing.com consensus 230K). The day's data will be topped off with the 10:00 ET release of the ISM Services Index for January (consensus 56.5). 

Nasdaq Composite -0.2% YTD

S&P 500 -0.4% YTD

Russell 2000 -0.6% YTD

Dow Jones Industrial Average -0.9% YTD