Day Traders Diary

12/9/15

The stock market ended the midweek affair on a broadly lower note with the S&P 500 surrendering 0.8% after being up 0.8% in the early going. The benchmark index returned below its 200-day moving average (2,064) while the Nasdaq (-1.5%) underperformed throughout the day.

The early portion of today's session appeared to have the makings of a rebound, but the opening strength was entirely due to significant gains in two commodity-related sectors. The materials space (+3.1%) ended comfortably in the lead after it was reported that Dow Chemical (DOW 56.97, +6.07) and DuPont (DD 74.49, +7.89) are in advanced merger talks. Both names surged 11.9% with DuPont's strength keeping the Dow ahead of the broader market.

Similar to materials, the energy sector (+1.3%) ended well ahead of the broader market, but it is worth noting that today's gain occurred after the growth-sensitive group gave up 4.8% over the past two days. Crude oil, however, could not remain in the green, ending the day lower by 0.9% at $37.18/bbl even though the latest storage report from the Energy Information Administration showed the biggest inventory draw in four months.

That storage report briefly propelled crude into the $39.00/bbl area, but the ensuing reversal in oil coincided with the turn in the equity market that left just three sectors in the green when the closing bell rang.

The late morning slide from highs was paced by the technology sector (-1.5%), which struggled from the start. The top-weighted group kept the Nasdaq behind the S&P 500 while biotechnology also weighed on the tech-heavy index. The iShares Nasdaq Biotechnology ETF (IBB 325.20, -5.39) settled lower by 1.6% while the health care sector lost 1.0%.

Similar to technology, heavily-weighted financials (-1.2%) and consumer discretionary (-1.2%) contributed to the intraday selloff. Lululemon (LULU 45.31, -6.84) was among the notable laggards in the discretionary space, falling 13.1%, after below-consensus earnings and revenue guidance overshadowed a bottom-line beat.

Staying on the retail theme, Costco (COST 159.72, -9.15) fell 5.4% after missing earnings and revenue estimates while the broader consumer staples sector (-0.9%) settled just behind the broader market.

The cautious posture exhibited in the market was not unique to stocks as currency traders also displayed some unease, evidenced by a rally in the yen that caused the dollar/yen pair to slide 1.3% to 121.35. Similarly, the euro rallied 1.2% against the dollar to 1.1020, suggesting some carry trades were unwound intraday.

Treasuries retreated during the morning advance in stocks, but they climbed to highs in the afternoon, sending the 10-yr yield lower by a basis point to 2.21%.

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

Economic data was limited to Wholesale Inventories and MBA Mortgage Index:

October Wholesale Inventories fell 0.1% while the Briefing.com consensus expected an increase of 0.2%

The September reading was revised down to 0.2% from 0.5%

The inventories/sales ratio was 1.31 in October, up from 1.22 in October 2014

The weekly MBA Mortgage Index rose 1.2% to follow last week's 0.2% downtick

Tomorrow, weekly Initial Claims (Briefing.com consensus 269K) and November Import/Export Prices will be reported at 8:30 ET while the November Treasury Budget will be released at 14:00 ET.

Nasdaq Composite +6.1% YTD

S&P 500 -0.6% YTD

Dow Jones Industrial Average -1.9% YTD

Russell 2000 -4.6%