Day Traders Diary

3/5/14

The stock market ended the Thursday session on a modestly higher note with the Nasdaq Composite (+0.3%) settling in the lead. The tech-heavy index is now up 0.4% week-to-date, while the S&P 500 (+0.1%) will enter the Friday session lower by 0.2% for the week.

In a way, today's session fit right in with recent affairs as equity indices maintained narrow ranges amid light volume. The S&P 500 spent the day inside a nine-point range while NYSE floor volume totaled fewer than 675 million shares (50-day average 766 million).

Six of ten sectors registered gains with three of four countercyclical groups ending ahead of the broader market. To that point, consumer staples (+0.3%), health care (+0.4%), and utilities (+0.8%) spent the day ahead of the broader market while telecom services (-0.1%) lagged.

Most notably, the health care sector was underpinned by biotechnology after AbbVie (ABBV 56.85, -3.42) agreed to acquire Pharmacyclics (PCYC 254.22, +23.74) for $261.25/share. Shares of PCYC jumped 10.3% while the broader iShares Nasdaq Biotechnology ETF (IBB 347.67, +7.58) advanced 2.2%, helping the Nasdaq finish in the lead.

However, the relative strength among biotech names masked a significant soft spot in the market. Specifically, the largest stock by weight—Apple (AAPL 126.39, -2.15)—lost 1.7%, which prevented equity indices from revisiting their morning highs. Meanwhile, the technology sector (-0.1%) held up relatively well despite Apple's weakness. Large cap names like IBM (IBM 161.18, +1.76) and Google (GOOGL 581.44, +3.10) gained 1.1% and 0.5%, respectively, while chipmakers also displayed relative strength with the PHLX Semiconductor Index adding 0.1%.

Similar to technology, growth-sensitive energy (-0.6%) and materials (-0.4%) settled in the red while the other cyclical sectors registered gains.

The energy sector finished at the bottom of today's leaderboard with crude oil contributing to the weakness. The energy component fell 1.5% to $50.76/bbl as dollar strength sent the Dollar Index (96.37, +0.40) to a fresh high for the year. The greenback rallied against the euro, dropping the euro/dollar pair to 1.1030 after European Central Bank President Mario Draghi said the central bank will begin its QE program on March 9, buying negative-yielding bonds up to the deposit rate, which is currently at -0.2%.

On the flip side, the financial sector (+0.4%) ended among the leaders ahead of the 16:30 ET release of the Fed's stress test. The Federal Reserve will announce capital levels of 31 major banks this evening while next Wednesday evening will feature the release of complete results. Bank of America (BAC 16.00, +0.16) led the majors with a 1.0% gain.

Treasuries spent some time on either side of their flat lines before ending with slim gains, sending the 10-yr yield lower by a basis point to 2.11%.

Economic data included jobless claims, productivity/labor cost data, and factory orders:

The initial claims level increased to 320,000 from an unrevised 313,000 while the Briefing.com consensus expected a decline to 295,000 

The reading marked the highest level of initial claims since May 2014 when it reached 327,000

The Department of Labor reported that no special factors impacted this week's claims reading

The continuing claims level increased to 2.421 million from an upwardly revised 2.404 million (from 2.401 million)

Nonfarm business productivity for Q4 2014 was revised down to -2.2% from an originally reported -1.8% while the Briefing.com consensus expected a revision down to -2.3%

Annual productivity in 2014 was 0.7%, which was the smallest annual gain since increasing only 0.2% in 2011

Unit labor costs were revised up to 4.1% from 2.7% while the consensus expected a revision up to 2.9%

Factory orders declined 0.2% in January after declining 3.5% in December while the Briefing.com consensus expected an increase of 0.6% 

Almost the entire decline can be attributed to low oil prices as petroleum refinery orders declined 11.6% in January after declining 15.8% in December. Excluding petroleum, factory orders increased a solid 1.1% in January

Tomorrow, the Nonfarm Payrolls report for February (Briefing.com consensus 240K) and the January Trade Balance (consensus -$42.00 billion) will be released at 8:30 ET while the Consumer Credit report for January (expected $14.00 billion) will cross the wires at 15:00 ET.

Nasdaq Composite +5.2% YTD

Russell 2000 +2.5% YTD

S&P 500 +2.1% YTD

Dow Jones Industrial Average +1.8% YTD