Day Traders Diary

2/27/15

The stock market capped a quiet week with a subdued Friday session. However, it is worth noting that the range-bound week followed sharp gains registered earlier this month. The S&P 500 shed 0.3% on Friday to narrow its February gain to 5.5% while the Nasdaq Composite (-0.5%) underperformed today, but climbed 7.1% since the end of January.

Equity indices spent the bulk of the session near their flat lines before a wave of profit-taking during the final 90 minutes sent the indices to fresh session lows. Eight of ten sectors finished the day in the red, but only one sector—utilities (-0.1%)—registered a February loss. The rate-sensitive group fell 7.0% during the month as higher yields made Treasuries more attractive.

The technology sector (-0.5%) finished the day at the bottom of the leaderboard, but still added 7.9% for the month. Similar to the sector, the top-weighted component—Apple (AAPL 128.48, -1.94)—endured some profit taking following a big run in February. Shares of AAPL fell 1.5% today, but still ended the month higher by 9.7%.

Elsewhere, the energy sector lost 0.4% to narrow its February gain to 3.5% even though crude oil settled on its high. The energy component spiked 3.3% to $49.76/bbl, adding nearly 10.0% for the month. WTI crude surged off its afternoon low even after the Baker Hughes rig count registered its 12th consecutive decline (-43) to 1267.

Meanwhile, the remaining cyclical sectors finished closer to their respective flat lines. For instance, the discretionary sector (-0.1%) ended slightly lower with many apparel retailers enjoying gains after Gap (GPS 41.60, +1.23) reported a one-cent beat, announced a $1 billion buyback, and boosted its dividend by 5.0%, which overshadowed below-consensus guidance. Peer J.C. Penney (JCP 8.50, -0.62) headed in the opposite direction, falling 6.8%, after missing earnings estimates.

The countercyclical side looked a bit better today with consumer staples (+0.4%) and telecom services (+0.3%) registering modest gains while the aforementioned utilities sector (-0.1%) and health care (-0.5%) settled in the red.

Consumer staples rallied behind Coca-Cola (KO 43.30, +0.84) and Monster Beverage (MNST 141.12, +16.38) after the latter reported better than expected results. On the flip side, Herbalife (HLF 31.01, -3.81) tumbled 10.9% after its disappointing revenue and cautious guidance overshadowed a bottom-line beat.

Treasuries registered modest gains with the 10-yr yield slipping three basis points to 2.00%. Despite today's advance, the 10-yr note ended February in the red with its yield 32 basis points above where it ended January. For its part, the Dollar Index (95.33, +0.03) eked out a slim gain on Friday and finished the month higher by 0.4%.

Although the final week of February was relatively quiet on the international front, that could change in a hurry. Yesterday evening, Kathimerini reported that Greece is due to pay EUR1.60 billion to the IMF next month, but it is uncertain whether the country will be able to make the payment on time. The IMF is scheduled to receive the first installment in the amount of EUR310 million on Friday, March 6.

Economic data included Q4 GDP, Chicago PMI, Michigan Sentiment Index, and Pending Home Sales:

Fourth quarter GDP was revised down to 2.2% in the second estimate from 2.6% in the advance estimate after increasing 5.0% in Q3 

The Briefing.com consensus expected a revision down to 2.1%

Despite the downward revision, the GDP report actually reveals slightly better economic trends in the second estimate. Nearly all of the revision resulted from weaker inventory growth -- $88.40 billion vs. $113.10 billion in the advance release. Excluding inventories, real final sales were revised up to 2.1% from an originally reported 1.8%

The University of Michigan Consumer Sentiment Index was revised up to 95.4 in the final February reading from 93.6 while the Briefing.com consensus expected a revision up to 94.0 

Even after the revisions, the Consumer Sentiment Index is still down from 98.1 in January

The Chicago PMI declined to 45.8 in February from 59.4 while the Briefing.com consensus expected a drop to 58.0 

This was the first reported contraction in the Chicago region since April 2013 and the largest contraction since the index dropped to 42.7 in July 2009

Readings throughout the report were abysmal, and every index, with the exception of supplier deliveries (58.3 from 54.9), contracted in February

Pending home sales for January rose 1.7% while the Briefing.com consensus expected an increase of 2.4%

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

Nasdaq Composite +4.8% YTD

Russell 2000 +2.4% YTD

S&P 500 +2.2% YTD

Dow Jones Industrial Average +1.7% YTD