Day Traders Diary

1/19/15

The major averages ended the first session of the abbreviated week above their flat lines, as pressure regarding global growth and lower oil prices weighed on the market's early rally. Today's session began sharply higher after a miss in China's Q4 GDP report invited speculation regarding potential stimulus from the People's Bank of China, but soon the realities of shrinking global growth and a persisting oil glut pressured the market lower. The Nasdaq (-0.3%) registered the largest decline while the Dow Jones Industrial Average (+0.2%) and the S&P 500 (+0.1%) outperformed.

Last night, China released its Q4 GDP report, which showed that quarter-over-quarter GDP growth came in at 1.6% while year-over-year GDP growth was reported at 6.8%. Additionally, China reported below-consensus Industrial Production (5.9% vs 6.0%) and Retail Sales (11.1% vs 11.3%) in December. This was the slowest GDP reading since 2009 and prompted heavy speculation that the People's Bank of China would institute new stimulus measures to combat the growth issues. To that point, a late afternoon report from China Securities Journal argued for a cut to the reserve requirement ratio. 

European indices, U.S. futures, and pre-market crude oil trading were able to benefit from this speculation. Shortly after the U.S. open though the focus shifted to the resulting implications to global growth. On that note, the International Monetary Fund revised its global growth projection to 3.4% for 2016 and 3.6% for 2017 versus prior estimates of 3.6% and 3.8%, respectively. Shortly after the opening bell the major averages met resistance near the upper end of their trading ranges, retreating into the afternoon.

Rounding out the leaderboard, commodity-sensitive energy (-2.1%) and materials (-1.2%) were followed by health care (-0.1%) and technology (-0.1%) while countercyclical utilities (+1.5%), consumer staples (+1.2%), and telecom services ( +1.2%) lead.

Looking at the energy sector, independent oil and gas companies like ConocoPhillips (COP 36.40, -2.96) lead the retreat in the group with a decline of 7.5%. Increased pressure in oil companies came after WTI crude surrendered the $30.00/bbl price level. Oil was able to recover slightly, ending its pit session lower by 2.5% at $29.62/bbl. Elsewhere in the energy space, Dow components Chevron (CVX 81.51, -2.16) and Exxon Mobil (76.40, -1.18) paced the sector's decline.

In the health care space, UnitedHealth Group (UNH 112.58, +3.31) outperformed after the company reported an earnings beat with EPS at $1.40 and reaffirmed its FY 2016 guidance. UnitedHealth Group ended its day 3.0% higher. Fellow large-cap component Eli Lilly (LLY 83.23, +1.99) climbed 2.5% after the company affirmed its earning guidance for 2016 with EPS of $3.45-3.55. Elsewhere in the space, biotechnology showed relative weakness, evidenced by the 2.2% decline in the iShares Nasdaq Biotechnology ETF (IBB 277.84, -6.34).

Switching to financials (UNCH), the group was one of the early leaders until a sharp reversal knocked the sector to the middle of the board. Morgan Stanley (MS 26.26, +0.29) managed to outperforms the space, following a beat on Q4 earnings with EPS of $0.43 and a beat on revenue at $7.74 billion. Elsewhere, Bank of America (BAC 14.24, -0.22) declined 1.5% despite beating earnings estimates on in-line revenue.

In other earnings of note, Dow Jones Transportation Average (-0.5%) component Delta Airlines (DAL 45.96, +1.46) posted the largest advance in the complex after narrowly missing on earnings this morning; however, the carrier raised its Q1 operating margin guidance to 18-20% from 16-17%. Elsewhere in the composite, United Continental (UAL 45.18, -0.49) and JetBlue (JBLU 20.26, -0.43) declined 1.1% and 2.1%, respectively. 

Treasuries fell to their lows during the morning rally but were able to move higher during the market pullback. Ultimately, the 10-yr note settled just below its flat line with its yield higher by a basis point at 2.05%. 

Today's session saw heavy volume with more than a billion shares changing hands at they NYSE floor. 

Today's economic data was limited to the NAHB Housing Market Index, which came in at 60, following a revised reading of 60 in December (from 61) (Briefing.com consensus 61.0).

Tomorrow's economic data includes the weekly MBA Mortgage Index, which will be released at 7:00 ET, while December CPI (Briefing.com consensus 0.0%), December Core CPI (Briefing.com consensus +0.2%), December Housing Starts (Briefing.com consensus 1197k), and Building Permits (Briefing.com consensus 1200k) will cross the wires at 8:30 ET. 

• Russell 2000 -12.3 YTD
• Nasdaq -10.6% YTD
• Dow Jones -8.1% YTD
• S&P 500 -8.0 YTD