Day Traders Diary

3/12/15

The major averages sport solid midday gains with the Dow (+1.0%) and S&P 500 (+0.9%) trading ahead of the Nasdaq Composite (+0.6%).

Equity indices charged out of the gate and registered the bulk of their gains during the opening hour as part of a broad-based rebound after two days of selling. The S&P 500 reclaimed its 100-day moving average in short order and currently hovers in the neighborhood of its 50-day moving average (2,060).

The early advance has occurred despite a disappointing Retail Sales report for February (-0.6%; Briefing.com consensus 0.4%), but one could argue that the report strengthens the case for the Fed to delay its first rate hike.

Furthermore, the Dollar Index (99.39, -0.41) has pulled back from its multi-year high, which has been a supportive factor. Interestingly, the greenback weakness has not been able to prevent crude oil from sliding in to the red. The energy component trades lower by 1.4% at $47.51/bbl after surrendering its morning gain. The decline in crude has pressured the energy sector (-0.1%) while the remaining nine groups sport gains.

The utilities sector (+1.8%) holds the lead, but more notably consumer discretionary (+1.6%) and financials (+1.4%) trade well ahead of the broader market.

Financials outperform after the Federal Reserve approved capital plans of 28 out of 31 banks. Bank of America (BAC 15.93, -0.18) is required to make some changes to its plan while Deutsche Bank (DB 31.44, -0.14) and Banco Santander (SAN 6.82, +0.05) had their plans rejected due to qualitative concerns.

Meanwhile, the discretionary sector has enjoyed broad support. Retailers and homebuilders display strong gains with SPDR S&P Retail ETF (XRT 98.99, +1.38) and iShares Dow Jones US Home Construction ETF (ITB 27.21, +0.35) both up near 1.3%.

Elsewhere, the technology sector (+0.3%) has struggled to keep up with the market due to a 4.6% decline in the shares of Intel (INTC 30.85, -1.48) after the company cut its Q1 revenue guidance due to weaker than expected demand for business desktop PCs. Including today's decline, Intel is down 15.0% quarter-to-date.

Treasuries have retreated from their highs, but they remain in the green with the 10-yr yield down three basis points at 2.08%.

Economic data included Initial Claims, Retail Sales, Import/Export Prices, and Business Inventories:

Retail sales declined 0.6% in February after declining 0.8% while the Briefing.com consensus expected an increase of 0.4% 

Some may blame the inclement weather in the Northeast as a contributing factor; however, in our opinion, the decline simply resulted from consumers continuing their savings trend and not spending.

The numbers were pretty weak across the board, with motor vehicle sales being the hardest hit sector. These sales fell 2.5% in February after increasing 0.5% in January.

Excluding motor vehicle sales, retail sales declined 0.1% after declining 1.1% while the consensus expected an increase of 0.6%.

The initial claims level declined to 289,000 for the week ending March 7 from an upwardly revised 325,000 (from 320,000) while the Briefing.com consensus expected a decline to 306,000 

According to the Department of Labor, there were no special factors that impacted the data

Export prices, excluding agriculture, increased 0.2% in February after decreasing 1.0% in the prior reading 

Excluding oil, import prices fell 0.3%, which followed last month's 0.7% decline

Business Inventories were unchanged in January while the Briefing.com consensus expected an increase of 0.1% 

The December reading was revised to unchanged from 0.1%

The Treasury Budget for February (consensus -$192 billion) will be released at 14:00 ET.