Day Traders Diary

12/15/15

The stock market enjoyed a broad-based rally on Tuesday, which lifted the S&P 500 (+1.1%) back above its 100-day moving average (2,030). The benchmark index extended this week's gain to 1.5% ahead of tomorrow's FOMC announcement, which is widely expected to call for the first fed funds rate hike since 2006.

Overnight, the early portion of the Asian session was highlighted by some caution among investors, but the overall sentiment began improving once the attention shifted to Europe. Accordingly, markets in France (+3.2%), Germany (+3.1%), and the UK (+2.5%) soared amid broad support.

Contributing to the upbeat sentiment was a rally in crude oil as the energy component climbed despite greenback strength that sent the Dollar Index (98.22, +0.62) higher by 0.6%. As for oil, WTI crude surged 2.7% to $37.32/bbl, taking the energy sector (+2.9%) along for the ride.

The growth-sensitive energy sector settled atop the leaderboard, but despite today's surge, the sector is still down 7.8% for the month. Similarly, the financial sector (+2.4%) was also at the forefront of today's advance after showing relative weakness as of late. The economically-sensitive group narrowed its December loss to 2.0% versus a 1.8% month-to-date decline for the S&P 500. Recent concerns about the high-yield bond space were masked by a 1.6% spike in iShares iBoxx $ High Yield Corporate ETF (HYG 80.12, +1.29), which returned to its range from Friday.

Staying on the cyclical side, the top-weighted technology sector (+0.4%) settled behind the broader market as Apple (AAPL 110.49, -1.99) slid 1.8% to extend yesterday's retreat. However, the relative weakness in the top tech component was partially offset by gains among semiconductor names. The PHLX Semiconductor Index rose 1.5% with Qualcomm (QCOM 48.02, +1.19) surging 2.5% after the company boosted its guidance and announced plans to maintain its organizational structure.

Elsewhere, the industrial sector (+0.1%) could not keep pace with the market after 3M (MMM 148.13, -9.50) lowered its guidance. The Dow component settled lower by 6.0% while another sector member—Deere (DE 77.24, -1.70)—slumped 2.2% after peer AGCO (AGCO 46.04, -3.38) cut its earnings and revenue outlook.

Today's rally in stocks was met with selling interest in the Treasury market. The 10-yr note settled near its session low, pushing the benchmark yield to 2.27% (+5 bps).

Investor participation was ahead of average as more than 940 million shares changed hands at the NYSE floor.

Economic data included CPI, Empire Manufacturing, and NAHB Housing Market Index:

The Consumer Price Index was unchanged in November (Briefing.com consensus 0.0%) while core CPI increased 0.2% in November (consensus +0.2%)

On a year-over-year basis, total CPI is up 0.5%, representing the highest level since December 2014

On a year-over-year basis, core CPI is up 2.0%, representing the highest level since May 2014

The Empire Manufacturing Survey for December improved to -4.7 from -10.7 reported in November while the Briefing.com consensus expected a reading of -5.9

The NAHB Housing Market Index slipped to 61 from 62 while the consensus expected an improvement to 63

Tomorrow, weekly MBA Mortgage Index will be reported at 7:00 ET while November Building Permits (Briefing.com consensus 1.15 million) and Housing Starts (consensus 1.135 million) will be reported at 8:30 ET. The November Industrial Production report (consensus 77.5%) will cross the wires at 9:15 ET and the latest policy decision from the Federal Open Market Committee will be released at 14:00 ET (consensus 0.5%).

Nasdaq Composite +5.5% YTD

S&P 500 -0.8% YTD

Dow Jones Industrial Average -1.7% YTD

Russell 2000 -6.0% YTD