Day Traders Diary

12/18/15

The stock market ended a volatile week on a defensive note. The Dow Jones Industrial Average paced the Friday slide, falling 2.1% while the S&P 500 (-1.8%) and Nasdaq Composite (-1.6%) registered slimmer losses.

Overnight, the Bank of Japan stepped up its easing efforts by announcing plans to purchase JPY300 billion worth of ETFs starting in April of 2016; however, the market scoffed at the news with Japan's Nikkei diving 1.9% while the yen climbed 1.1% against the dollar (121.27). This is noteworthy because stimulus from major central banks has been a big reason for the rally seen in global markets over the past few years. Therefore, a negative market reaction to news of more stimulus could be indicative of a sentiment change as participants begin wondering whether global central banks have reached their limits.

Investor sentiment saw little improvement as the focus shifted to the European session and the selling carried over to U.S. markets. Consequently, the first three hours of the day saw a steady slide in the key indices and they hit new lows ahead of the closing bell.

All ten sectors ended the day in negative territory with cyclical sectors showing relative weakness. The financial sector (-2.5%) spent the day behind its peers, but despite today's underperformance, the economically-sensitive sector ended the week flat. However, other growth-sensitive groups were not nearly as fortunate, posting weekly losses between 0.4% (consumer discretionary) and 3.1% (materials).

The top-weighted technology sector (-2.0%) lost 1.3% for the week after having to contend with weeklong underperformance in the shares of Apple (AAPL 105.90, -3.08). The largest stock by market cap tumbled 2.8% on Friday, ending the week lower by 6.4%.

Elsewhere, the energy sector (-1.6%) settled ahead of the broader market, but the group was knocked down from its high by an intraday reversal in crude oil. The energy component flashed a brief gain in the late morning, but followed that with a slide to a new low for the week, ending the pit session down 0.7% at $34.72/bbl.

The broad retreat that unfolded over the course of Thursday and Friday masked the fact that the S&P 500 ended the week little changed, shedding 0.3%. Five of six cyclical sectors finished the week in negative territory, but the four countercyclical groups posted weekly gains between 0.5% (consumer staples) and 2.8% (utilities), suggesting some sector rotation took place as investors tested the waters in defensively-oriented areas of the market.

Today's slide in equities was accompanied by strength in the bond market as the 10-yr note rallied overnight and held its ground during the day. The benchmark note ended near its high, pressuring its yield three basis points to 2.19%.

Investor participation was strong today, but that was largely due to quadruple witching. As a result, more than two billion shares changed hands at the NYSE floor.

Market participants will not receive any economic data on Monday.

Nasdaq Composite +4.0% YTD

S&P 500 -2.6% YTD

Dow Jones Industrial Average -3.9% YTD

Russell 2000 -6.8% YTD