Day Traders Diary

1/26/16

The stock market ended an upbeat Tuesday session off its high but with solid advances in the major indices. Today's rally was sustained by a sharp rebound in crude oil and a dovish tone expected from the Federal Open Market Committee's policy statement tomorrow. The Dow Jones Industrial Average (+1.8%) settled in the lead while the S&P 500 (+1.4%) and the tech-heavy Nasdaq (+1.1%) followed.

Overnight, the Shanghai Composite surrendered 6.4%, seeing little respite from a 440 billion yuan People's Bank of China injection through reverse repurchase operations. The market appeared disappointed by comments from PBoC assistant governor Zhang Xiaohui who said the central bank has no plans to introduce reserve requirement ratio cuts at this time.

Oil was resilient to this downturn and was able to eke forward after Iraq's oil minister alluded to flexibility from non-OPEC states in collaborating regarding production cuts. WTI crude was able to tack on steady gains overnight, but the commodity's rally was in full effect during today's session. Oil was able to climb above the $32.00 price level before paring some of its gains into the close. WTI crude ended its day higher by 3.6% at $31.43/bbl. On a related note the American Petroleum Institute is set to announce its weekly crude oil, gasoline, and distillates inventory report after today's close.

Energy (+3.8%) was able to capitalize on the strong price action in crude to climb the leaderboard where it was followed by telecom services (+1.9%), financials (+1.8%), industrials (+1.8%), and materials (+1.8%). Meanwhile, utilities (0.8%) and heavily-weighted health care (+0.8%) sported the slimmest gains.

Dow components Chevron (CVX 84.12, +3.23) and Exxon Mobil (XOM 76.70, +2.72) were able to help the index outperform, as the two names showed relative strength with advances of 4.0% and 3.7%, respectively. Meanwhile, 3M (MMM 144.78, +7.21) showed relative strength in the industrial sector after reporting a Q4 earnings beat this morning. 3M was the best performing component in the Dow, climbing 5.2%.

Elsewhere, the financial sector rebounded today, as the beleaguered group had surrendered 13.0% in January, before today's session. The effort was spurred forward by relative strength from money center banks. On that note, Bank of America (BAC 13.31, +0.35), Citigroup (C 40.50, +0.95), and JPMorgan Chase (JPM 57.08, +1.42) advanced between of 2.4% and 2.7%. Meanwhile, American International Group (AIG 55.91, +0.55) gained 1.0% after it reported that it will be spinning off AIG Advisors to Lightyear Capital and PSP Investments among other divestment moves.

In the top-weighted tech space (+0.9%), large-cap constituents Alphabet (GOOGL 733.79, +0.17), Facebook (FB 97.34, +0.32), and Apple (AAPL 99.99) showed relative weakness throughout the day On a related note, Apple will announce its Q1 earnings report after today's close.

Similar to technology, the health care space showed relative weakness today. Heavyweight Johnson & Johnson (JNJ 101.18, +4.78) markedly outperformed in reaction to above-consensus results, but biotechnology kept the sector behind the broader market with the iShares Nasdaq Biotechnology ETF (IBB 282.08, -1.12) shedding 0.4%.

Today's trading volume remained above recent averages as more than a billion shares changed hands at the NYSE floor.

Treasuries spent most of the session trading on their lows but were able to tick higher as stocks backed away from their highs. The yield on the benchmark note closed its day flat at 2.01%.

Today's economic data included November's Case-Schiller 20-city Index, the FHFA Housing Price Index for November, and January's Consumer Confidence report.

The Case-Shiller 20-city Home Price Index for November rose 5.8% (Briefing.com consensus 5.8%).

This followed the previous month's increase of 5.5%.

The FHFA Housing Price Index for November rose 0.5%, from an unrevised October reading of +0.5.

The Conference Board's Consumer Confidence Index increased to 98.1 in January (Briefing.com consensus 96.8) from a downwardly revised 96.3 (from 96.5) in December.

The Expectations Index increased from 83.0 to 85.9 in January. The Present Situation Index was unchanged at 116.4.

According to the Conference Board, the takeaway is that consumers do not foresee the volatility in financial markets as having a negative impact on the economy.

Tomorrow's economic data includes the weekly MBA Mortgage Index set to be released at 7:00 ET while New Home Sales (Briefing.com consensus 506k) will cross the wires at 10:00 ET. The day will culminate with the FOMC policy statement for January (Briefing.com consensus 0.5%), which will be announced at 14:00 ET.

Russell 2000 -10.5% YTD

Nasdaq -8.8% YTD

Dow Jones -7.2% YTD

S&P 500 -6.9% YTD