Day Traders Diary

11/6/15

The S&P 500 could not avoid its third consecutive decline on Friday as rising rate hike expectations weighed on equities. To be fair, the benchmark index missed a green close by 0.74 points while the Dow (+0.3%) and Nasdaq Composite (+0.4%) erased their opening losses.

Equities stumbled at the start after the October Employment report easily surpassed expectations, thus increasing the likelihood of a fed funds rate hike at the December policy meeting to 69.8% from yesterday's 58.1%. Specifically, October nonfarm payrolls came in at 271,000 while the Briefing.com consensus expected a reading of 181,000. Also of note, hourly earnings rose 0.4% while the consensus expected an uptick of 0.2%.

Once the report crossed the wires, investors rushed into the greenback while Treasuries and equity futures retreated. The Dollar Index (99.14, +1.21) held its ground to end the day higher by 1.2% near levels last seen in mid-April. As for Treasuries, the 10-yr note finished near its low with the benchmark yield rising ten basis points to 2.33%, representing the highest settlement since late July.

Similar to Treasuries, equities slumped in immediate reaction to the report, but unlike Treasuries, the stock market staged a rebound off its opening lows. Six sectors ended the day with losses while financials (+1.1%) and technology (+0.4%) outperformed throughout the day, helping the market return into the neighborhood of its flat line by the closing bell.

The financial sector rallied due to the rising probability of a December rate hike, extending this week's gain to 2.5%, which put the sector ahead of its peers. Meanwhile, the top-weighted tech space spent the day near its flat line with broad strength in the chipmaker space overshadowing a mixed performance from large cap sector components. To that point, the PHLX Semiconductor Index surged 2.6% with Skyworks (SWKS 85.99, +5.71) and NVIDIA (NVDA 31.55, +3.84) soaring 7.1% and 13.9%, respectively, in reaction to better than expected results.

On the downside, countercyclical sectors faced the most aggressive selling with consumer staples (-1.1%), telecom services (-0.7%), and utilities (-3.6%) ending at the bottom of the leaderboard. That being said, the energy sector (-0.4%) also finished among the laggards despite showing considerable strength earlier this week. The growth-sensitive group narrowed its weekly gain to 1.1% while crude oil surrendered 2.0% on Friday, ending the week lower by 4.8% at $44.29/bbl.

Today's participation was well ahead of average with more than 975 million shares changing hands at the NYSE floor.

Taking another look at today's employment data:

Nonfarm payrolls increased by 271,000 (Briefing.com consensus 181,000)

September nonfarm payrolls revised to 137,000 from 142,000

Private sector payrolls increased by 268,000 (Briefing.com consensus 160,000)

September private sector payrolls revised to 149,000 from 118,000

Unemployment rate slipped to 5.0% (Briefing.com consensus 5.1%) from 5.1% in September

The U6 unemployment rate, which accounts for the total unemployed plus persons marginally attached to the labor force and the underemployed, was 9.8% versus 10.0% in September

Average hourly earnings increased 0.4% (Briefing.com consensus 0.2%) after being unchanged in September

Over the last 12 months, average hourly earnings have risen 2.5% versus 2.3% in September, representing the highest year-over-year rate since July 2009

The labor force participation rate held at 62.4% for the second month in a row

On a separate note, the Consumer Credit report for September showed an increase of $28.90 billion while the Briefing.com consensus expected growth of $18.00 billion. It is worth noting that the September reading represented the biggest jump in non-revolving credit since July 2011.

Monday's session will be free of economic data.

Nasdaq Composite +8.5% YTD

S&P 500 +1.8% YTD

Dow Jones Industrial Average +0.3% YTD

Russell 2000 -0.4% YTD

Week in Review: Nasdaq Leads Stocks Higher