Day Traders Diary

1/15/16

The stock market ended its final session of the week on a sharply lower note, with the S&P 500 (-2.2%) registering a new 52-week low (1857.83) before the benchmark ticked off this low. Heavy selling in the oil market and below consensus economic data prompted today's selloff, but both of these echoed recent growth concerns. The tech-heavy Nasdaq (-2.7%) underperformed both the benchmark index and the Dow Jones Industrial Average (-2.2%).

Oil felt pressure overnight ahead of an anticipated report from the International Atomic Energy Agency. The agency was expected to issue a statement asserting that Iran complied with an agreement to restrict the country's nuclear program. This report is expected to pave the way for oil export sanctions to be lifted. This report was not delivered as of the closing bell, but it is expected to be released on Saturday. Nevertheless, oil was hammered below the $31.00/bbl price level, which weighed on global equity indices. WTI crude would end the day lower by 5.7% at $29.45/bbl, which represented the first close below $30.00/bbl in twelve years.

If this wasn't enough, Citigroup (C 42.47, -2.91) announced in its Q4 earnings report that it increased its loan loss reserve by $549 million to cope with exposure to the energy sector. This mirrored a similar announcement from JPMorgan Chase (JPM 57.04, -1.16) yesterday.

Ahead of the opening bell, futures extended their overnight losses when economic data came in below economists' expectations. The two most important misses were in December U.S. Retail Sales, which declined 0.1% (Briefing.com consensus +0.1%), and Industrial production, which fell 0.4% in December. In addition, a disappointing January Empire Manufacturing Report (-19.4; Briefing.com consensus -3.5) added to concerns about the manufacturing sector. 

Today's retreat was paced by financials (-3.4%), technology (-3.2%), energy (-2.9%), and consumer discretionary (-2.2%) while countercyclical utilities (-0.9%), telecom services (-1.1%), health care (-1.4%), and consumer staples (-1.6%) topped the board.

In the financial sector, large-caps Citigroup, Wells Fargo (WFC 48.82, -1.82) and Bank of America (BAC 14.46, -0.53) lead the losses in the space. The three names declined 6.4%, 3.6%, and 3.5%, respectively. This came despite Citigroup and Wells Fargo reporting earnings in-line with analyst expectations and ahead of Bank of America's earnings results on Tuesday.

Moving to the heavily-weighted technology sector, Intel (INTC 29.76, -2.98) outpaced the retreat in the group after reporting earnings this morning. Even after reporting a beat, the stock declined 9.1%, due to concerns regarding 2016 growth and a $200 million decline in operating income. Adding pressure in the semiconductor space was cautious guidance from Analog Devices (ADI 49.82, -0.68 ), which caused a 1.4% slip in the stock. For its part, the PHLX Semiconductor Index plunged 4.5%. Elsewhere in the tech space, sector large-caps Alphabet (GOOGL 710.49, -20.90), Facebook (FB 94.97, -3.40), and Microsoft (MSFT 50.99, -2.12) fell between 2.9% and 4.0%.

Switching to the health care space, biotechnology showed relative weakness throughout the day, evidenced by the 2.5% decline in the iShares Nasdaq Biotechnology ETF (IBB 284.18 -7.26).

Treasuries returned some of their early morning gains, but the 10-yr note still finished comfortably in the green, pressuring its yield to  2.03% (-6 bps).

Today's session produced the heaviest volume of the week with options expiration likely contributing to the increased total. As a result, more than 1.4 billion shares changed hands at the NYSE floor.

Today's economic data included December PPI, December Retail, January Empire Manufacturing Index, December Industrial Production report, November Business Inventories, and the preliminary reading of the Michigan Sentiment Index for January.

The Producer Price Index report for December produced a 0.2% decline

The downtick in the final demand index was due to a 0.7% decline in prices for final demand goods.

The index for final demand services ticked up 0.1%.

On a year-over-year basis, the index for final demand is down 1.0%, which is the eleventh consecutive 12-month decline.

Core PPI is up 0.3%. core PPI, which excludes food and energy, increased 0.1%.

December Retail Sales report decreased 0.1% (Briefing.com consensus +0.1%) while sales ex-auto also decreased 0.1% (Briefing.com consensus 0.3%).

Total sales for 2015 were up 2.1% from 2014 while Q4 sales rose 1.8% year-over-year.

Empire Manufacturing Survey for January registered a reading of -19.4, which was below the prior month's revised reading of -6.2 (from -4.6) (Briefing.com consensus -3.5)

Industrial production declined 0.4% in December with a revised 0.9% decline (from -0.6%) in November. (Briefing.com consensus -0.2%)

That was the fifth consecutive monthly decline

Total industrial production in December was down 1.8% below the December 2014 level.

Total industry capacity utilization dipped to 76.5% (Briefing.com consensus 76.9%) from a revised 76.9% (from 77.0%) in November.

Rates were down for all major industry groups, led by utilities, which fell to 73.2% from 74.8%.

Total business inventories were down 0.2% in November following a downwardly revised 0.1% decrease (from 0.0%) in October. (Briefing.com consensus unchanged)

Retailer inventories increased 0.2% in November on top of a 0.1% increase in October.

The inventory-to-sales ratio was unchanged at 1.38; this is up from the same period a year ago when the ratio stood at 1.32.

The preliminary reading for the University of Michigan Index of Consumer Sentiment for January was 93.3 (Briefing.com consensus, which was at 92.6.)

This was up from the final December reading of 92.6 

The improvement stemmed from a better Consumer Expectations component, which increased to 85.7 from 82.7.

The increase in expectations outweighed a drop in the Current Economic Conditions Index, which decreased to 105.1 from 108.1.

The market will be closed on Monday, in observation of Martin Luther King, Jr. Day.

Tuesday's economic data will be limited to the 10:00 ET release of the NAHB Housing Market Index (Briefing.com consensus 61).

Russell 2000 -11.3% YTD

Nasdaq -10.4% YTD

Dow Jones -8.3% YTD

S&P 500 -8.0% YTD

Week in Review: Stocks Extend January Slide