Day Traders Diary

1/25/16

The stock market ended its first session of the week under heavy selling pressure, pinned down by declining oil prices, added selling pressure in the financial sector, a decidedly poor showing from the small-cap stocks and a violation of a technical support level at 1890 for the S&P 500.

The biggest loser of the day was the Russell 2000 (-2.3%). It was followed by the Nasdaq Composite (-1.6%), the S&P 500 (-1.6%), and the Dow Jones Industrial Average (-1.3%).

There was weakness from the start of today's trading and not a whole lot of buying interest in general throughout the session.  The lack of buying interest stemmed in part from an understanding that the week ahead contains a number of potentially important market-moving catalysts:

Earnings results from the likes of Apple (AAPL 99.41, -2.01), Amazon.com (AMZN 596.53), Boeing (BA 124.04, -0.60), and Ford (F 11.98, -0.16) to name a few luminaries

The Federal Open Market Committee meeting on Wednesday

The Bank of Japan meeting on Thursday; and

The advance estimate for fourth quarter GDP, which the Atlanta Fed's GDPNow model forecast is for just 0.7% real growth

The weakness in oil prices began overnight as supply concerns once again took root.  Selling pressure intensified late in the day as the commodity settled its pit session down 5.8% at $30.34 per barrel.  Selling pressure in the stock market picked up with the drop to session lows for oil and persisted into the close as extended trading action took oil prices even lower.

The energy sector (-4.5%) was the worst-performing sector today and was followed by the materials (-3.3%) and financials (-2.3%) sectors. The telecom services (-0.3%), consumer staples (-0.8%), and utilities (-0.9%) sectors exhibited relative strength but still finished lower for the day.

The technology sector (-1.4%) reversed sharply intraday as large-cap constituents Alphabet (GOOGL 733.62, -11.84), Facebook (FB 97.01, -0.93), and Apple went on the defensive. The three companies declined between 1.0% and 2.0%. Alphabet is set to report earnings after the bell next Monday while Facebook reports after the close on Wednesday, and Apple reports after Tuesday's close.

The consumer discretionary space (-1.2%) was also under pressure, yet gains in Amazon.com and McDonald's (MCD 119.20, +0.80) helped keep losses in check. McDonald's was a top-performing Dow component after the company impressed investors with its latest earnings report and a reassuring-sounding outlook.

The Dow Jones Transportation Average (-1.9%) for its part had a tough day courtesy of weakness in many of its components, but primarily the railroads: Kansas City Southern (KSU 65.20, -2.21), CSX (CSX 21.97, -1.20), and Union Pacific (UNP 68.79, -1.20).

The weakness in the transports pressured the industrials sector (-1.3%), which also had to deal with a Goldman Sachs downgrade of Caterpillar (CAT 57.91, -0.50) to "Sell" from "Neutral."  in other developments, Johnson Controls (JCI 34.21, -1.39) and Tyco (TYC 34.15, +3.56) announced a merger, although that news didn't do anything to help turn the tide of selling interest in the broader market.

The lightly-weighted telecom services outperformed the broader market thanks to a strong showing from Verizon (VZ 47.03, -0.01).

Treasuries ticked higher throughout today's session as equities declined. The benchmark note ended its day on its high with the yield on the 10-yr note lower by four basis points at 2.01%.

Today's participation was lighter than the recent trend with only one billion shares changing hands on the NYSE floor.

There were no major U.S. economic releases today, although there were some focal points of weakness that included a disappointing trade balance report out of Japan, which featured an 8.0% year-over-year decline in exports, and a poor reading from the Dallas Fed Manufacturing Survey.

Tomorrow's economic data includes November's Case-Schiller 20-city Index (Briefing.com consensus 5.8%), the FHFA Housing Price Index for November, and January's Consumer Confidence report.

Russell 2000 -12.2% YTD

Nasdaq -9.8% YTD

Dow Jones -8.8% YTD

S&P 500 -8.2% YTD