Day Traders Diary

12/17/15

The stock market stumbled on Thursday, erasing its entire post-Fed advance. The S&P 500 lost 1.5%, falling below its 50- and 200-day moving averages (2,062), while the Nasdaq Composite (-1.4%) settled just a step ahead.

Equity indices held slim gains at the open after the overnight session saw a broad rally in Japan (+1.6%), France (+1.1%), and Germany (+2.6%); however, that bullish sentiment faded in a flash, pulling stocks lower through the first two hours of the session. The key indices ranged near their morning lows into the late afternoon, hitting new lows into the close.

The Thursday retreat was not a huge surprise considering a higher fed funds rate will translate into increased borrowing costs. Furthermore, the resulting dollar strength is expected to be a negative for U.S.-based companies that conduct a large portion of their activities overseas.

Fittingly, the greenback was on the rise today, climbing 0.7% against the euro (1.0808) while the yen (122.50) resisted some of the pressure, but still slid 0.4% against the dollar. As a result, the Dollar Index (99.23, +0.65) gained 0.7%, returning into the neighborhood of this year's high (100.51).

Today's dollar strength did no favors to crude oil as the energy component fell 1.7% to $34.95/bbl. The settlement price masked the fact that oil was down more than 2.8%, marking a session low ($34.64/bbl) just above its worst level from Monday ($34.53/bbl). Accordingly, the energy sector (-2.5%) paced today's retreat.

However, energy was not the only weak spot as every other cyclical sector settled behind the broader market. The top-weighted technology space (-1.6%) had to contend with relative weakness in Apple (AAPL 108.98, -2.36) as the largest stock by market cap fell 2.1% and returned into the neighborhood of yesterday's session low. Meanwhile, another large tech component—Oracle (ORCL 36.93, -1.98)—surrendered 5.1% after the company's sluggish revenue growth overshadowed a bottom-line beat.

Staying on the earnings front, FedEx (FDX 151.84, +3.01) spiked 2.0% after reporting better than expected earnings and reaffirming its guidance. It is worth noting that the company voiced some concern about the domestic economy, lowering its 2015 GDP growth forecast to 2.4% from 2.5%. FedEx represented a bright spot in the Dow Jones Transportation Average (-2.0%), but heavy losses in other index components caused the bellwether complex to widen its December loss to 7.0%.

Things looked a bit better on the countercyclical side where consumer staples (-1.3%), telecom services (-1.0%), and health care (-1.1%) registered slimmer losses than the broader market while the utilities sector (+0.1%) outperformed thanks to lower yields.

Interestingly, Treasuries spent the day in the green, hitting their highs just ahead of the close. The 10-yr note ended near its best level of the session, sending the benchmark yield lower by six basis points to 2.24%. Investors will keep a close watch on the bond market going forward, considering prolonged strength in Treasuries would be indicative of bond traders doubting the Fed's ability to continue raising rates.

Today's participation was above average as more than 920 million shares changed hands at the NYSE floor.

Economic data included Initial Claims, Philadelphia Fed Survey, Current Account balance, and Leading Indicators:

Weekly Initial claims declined by 11,000 to 271,000 (Briefing.com consensus 276,000), remaining bounded in the 250,000 to 300,000 range where they have been since July 2014

Continuing claims for the week ending December 5 decreased by 7,000 to 2.238 million (Briefing.com consensus 2.211 million)

The Philadelphia Fed's Manufacturing Index slipped back into negative territory in December with a reading of -5.9 (Briefing.com consensus 2.0) versus 1.9 in November. A number below zero denotes contraction

This was the third negative reading in the diffusion index for current activity in the last four months, reflecting weaker manufacturing conditions in the region

The diffusion index for future general activity is still positive, yet it showed a huge drop from 43.4 in November to 23.0 in December, representing the lowest reading since November 2012

The current account deficit for the third quarter totaled $124.10 billion while the Briefing.com consensus expected the deficit to hit $114.20 billion

The second quarter deficit was revised to $111.10 billion from $109.70 billion

The Conference Board's Leading Economic Index (LEI) increased 0.4% in November on top of an unrevised 0.6% increase in October (Briefing.com consensus +0.1%)

The difference between the expected number and the actual number can be traced back directly to the contribution from building permits, considering they were much stronger than expected in November, running at a seasonally adjusted annual rate of 1.289 million versus the Briefing.com consensus estimate of 1.150 million

Investors will not receive any economic data tomorrow.

Nasdaq Composite +5.6% YTD

S&P 500 -0.8% YTD

Dow Jones Industrial Average -1.8% YTD

Russell 2000 -5.4% YTD