Day Traders Diary

1/20/15

The major averages ended the Wednesday affair off their lowest levels as a rebound effort gained traction during the afternoon. The reversal in equities was partly fueled by recovering oil prices, but more likely, a short-term oversold market invited participants to take on more risk. Despite the rebound effort, the major indices ended in negative territory with the Dow Jones Industrial Average (-1.6%) trailing the S&P 500 (-1.2%) and the Nasdaq (-0.1%) .

Ahead of today's session, the People's Bank of China disappointed market participants by not enacting new stimulus measures in light of yesterday's GDP report. The release showed that China's economy grew 1.6% quarter-over-quarter in Q4 and 6.8% year-over-year, and elicited speculation that China would institute new stimulus provisions. Asian and European indices sold off in response to inactivity from the central bank, dragging oil prices lower with them. Oil was down more than 6.5% before recovering to a 3.7% decline at $28.35/bbl.

In front of the pack, health care (+0.2%), technology (-0.6%), materials (-0.7%), and consumer discretionary (-1.0%) outperformed while energy (-2.9%), utilities (-2.3%), financials (-2.1%), and telecom services (-1.6%) displayed the steepest declines.

Prior to the open, Goldman Sachs (GS 153.75, -3.07) reported bottom-line results that may not compare to estimates due to litigation charges on above-consensus revenue. Initially, investors focused on revenue falling 5.5% year-over-year, but soon turned their focus to the company's limited oil and gas exposure. During the company's conference call, the firm disclosed $10 billion dollars of total exposure to the energy sector with reserves in the high single digits. Goldman outperformed the broader sector with its loss being limited to 2.0%. Other large banks were likely impacted by recent disclosures of increased loan loss reserves to deal with their own exposure to the oil and gas industry. This is evidenced by Citigroup (C 40.49, -1.45) and JPMorgan Chase (JPM 55.51, -1.50) declining 3.5% and 2.6% after both banks disclosed expanded loan loss reserves.

Switching to the health care space, the sector climbed to the top of the leaderboard thanks to a reversal in biotechnology.  This reversal was evidenced by the 3.5% gain in the iShares Nasdaq Biotechnology ETF (IBB 285.49, +7.65), which was down as much as 1.1% inter day. Elsewhere in the space, large-cap components AbbVie (ABBV 57.15, +2.16) and UnitedHealth (UNH 114.79, +2.21) outperformed with respective advances of 3.9% and 2.0%.

In the consumer discretionary space, large-cap Amazon (AMZN 571.77, -2.71) rallied off of its session low, narrowing its loss to 0.5%. Elsewhere in the space, Dow component Nike (NKE 59.04, +0.72) rose 1.2% and reclaimed its 200-day moving average (57.50). Netflix (NFLX 107.74, -0.15) also staged a sharp reversal after a poor initial response to its earnings as domestic growth concerns outweighed a bottom-line beat.

In the technology space, heavy-weights Microsoft (MSFT 50.79, +0.23) and Apple (AAPL 96.82, +0.16) were able to overcome heavy selling pressure and end their days in positive territory. Fellow large-cap constituents Facebook (FB 94.35, -0.91) and Alphabet (GOOGL 718.56, -0.52) were unable to move past their flat lines, but were able to mount sharp reversals.

Today's affair generated one of the highest volume totals of the year with more than 1.4 billion shares changing hands at the NYSE floor.

Treasuries began their day sharply higher as the selloff in equities attracted safe haven flows. By the close the major indices had trimmed their deepest losses and the benchmark note pulled back from its high with the yield on the 10-yr note lower by seven basis points at 1.99%.

Economic data included the weekly MBA Mortgage Index, December CPI, December Core CPI, December Housing Starts, and December Building Permits.

The MBA Mortgage Index showed a seasonally adjusted increase of 9.0% in mortgage applications.

Total CPI declined 0.1% in December (Briefing.com consensus 0.0%) with the indexes for both energy and food declining for the second month in a row.

Excluding food and energy, core CPI was up 0.1% (Briefing.com consensus +0.2%).  

This was the smallest increase in core CPI since August

Total CPI is up 0.7% year-over-year, versus 0.5% in November, and core CPI is up 2.1% year-over-year versus 2.0% in November..

Building permits decreased to a seasonally adjusted annualized rate of 1.232 million in December (Briefing.com consensus 1.289 million).

Housing starts decreased 2.5% in December to a seasonally adjusted annual rate of 1.149 million (Briefing.com consensus 1.197 mln) which left them up 6.4% year-over-year.

The number of units under construction increased to 981,000 in December from 965,000 in November.

Building permits dipped to 1.232 million (Briefing.com consensus 1.200 mln) from a downwardly revised 1.282 million (from 1.289 mln) in November

The dip was much smaller than expected thanks to a 1.8% pickup in permits for single-family units.

Tomorrow, weekly initial claims (Briefing.com consensus 280k) and the January Philadelphia Fed Survey (Briefing.com consensus -4.0) will cross the wires at 8:30 ET.

Russell 2000 -12.0 YTD

Nasdaq -10.7% YTD

Dow Jones -9.5% YTD

S&P 500  -9.0 YTD