Day Traders Diary

1/28/16

The major averages ended the Thursday affair modestly higher as speculation regarding oil output cuts, and positive earnings results helped keep the stock market in positive territory. However, the major indices lost their footing near their opening highs as weaker than expected economic data, and conflicting reports between OPEC and non-OPEC states limited the upside of today's trade. The tech-heavy Nasdaq (+0.9%) outpaced the Dow Jones Industrial Average  (+0.8%) and the S&P 500 (+0.6%).

Today's session began on a positive note with earning results from Facebook (FB 109.11, +14.66) and Under Armour (UA 84.07, +15.49) each coming in ahead of analysts' estimates. Meanwhile, industrial giant Caterpillar (CAT 61.08, +2.76) issued above consensus EPS guidance for 2016 in its earnings report.

On the commodities front, WTI crude was able to extend its recent win streak due to increased speculation regarding oil production cuts between OPEC and non-OPEC states. This culminated when the Russian Energy Minister, Alexander Novak, released a statement saying that Saudi Arabia proposed a 5.0% cut to oil production by member states. This was followed by a denial from OPEC delegates, but despite the denial, oil was able to hold its ground above the $33.00/bbl level. WTI crude ended its session higher by 2.8% at $33.22/bbl.

In response to the upswing in oil, energy (+3.2%) settled on top of the leaderboard while utilities (+1.6%) and technology (+1.5%) followed. On the flipside, health care (-2.3%) was unable to make it out of negative territory while telecom services (+0.1%) and financials (+0.1%) also underperformed.

In the commodity-sensitive energy space, pipeline company Kinder Morgan (KMI 15.29, +1.19) and oilfield service company Schlumberger (SLB 69.51, +3.96) were able to capitalize on the positive price movement in crude to top the sector. Meanwhile, Dow components Chevron (CVX 85.92, +2.63) and Exxon Mobil (XOM 76.99, +1.70) were able to end their day near the top of that composite.

Switching gears, Facebook (FB 109.11, +14.66) dominated in the heavily-weighted technology space as it climbed 16.6% in response to a fourth quarter earnings beat. Fellow large cap Alphabet (GOOGL 748.30, +30.72) also outperformed, climbing 4.2%. To be fair, there was some relative weakness in the tech space as Cisco Systems (CSCO 23.10, -0.32) slid 1.4% in sympathy with Juniper Networks (JNPR 22.46, -4.08). Juniper plummeted 15.4% after issuing downside EPS guidance for Q1. Similarly, Qualcomm (QCOM 43.59, -3.94) lost 8.3% after below consensus guidance overshadowed better than expected earnings.

In health care, biotechnology showed persistent weakness, evidenced by the 3.7% tumble in the iShares Nasdaq Biotechnology ETF (IBB 263.40, -10.00). The sub-group responded to weakness in Celgene (CELG 97.21, -5.10), which missed bottom line estimates and issued below-consensus guidance.

Elsewhere, the financial sector continued to be anchored by American Express (AXP 52.88, -1.64), which has slid more than 16.0% since it reported earnings last week. Meanwhile, large-cap constituents Citigroup (C 40.39, -0.10) and Morgan Stanley (MS 25.17, -0.20) also showed relative weakness.

Once again, today's volume was relatively heavy as more than a billion shares changed hands at the NYSE floor.

Treasuries retreated from their lows for the bulk of the session, pressuring the 10-yr yield one basis point to 1.99%.

Today's economic data included weekly Initial Claims, Durable Orders for December, and Pending Home Sales for December.

Weekly initial claims were a bit better than expected, dropping to 278,000 (Briefing.com consensus 285,000) for the week ending January 23.

Initial claims remain bounded between 250,000 and 300,000, which is where they have been since July 2014, yet they have been showing signs of weakening in more recent reports.

Continuing rose to 2.268 million from the prior week's revised count of 2.219 from 2.208 million (Briefing.com consensus 2.230 million).

The four-week moving average for continuing claims sits at 2.246 million, up nearly 16,000 from the prior week's revised average.

Durable Goods Orders declined 5.1% (Briefing.com consensus -0.5%) on top of a downwardly revised 0.5% decrease (from 0.0%) for November.

Total durable goods orders are down 3.5% year-over-year while orders, excluding transportation, are down 2.6%.

Excluding transportation, orders fell 1.2% (Briefing.com consensus -0.1%) on the heels of a downwardly revised 0.5% decline (from 0.0%) for November.

Pending home sales for December ticked higher 0.1% (Briefing.com consensus +0.8%). The November reading was revised to -1.1% from -0.9%.

Tomorrow's economic data includes the advance reading of Q4 GDP (Briefing.com consensus 0.9%) will be released at 8:30 ET. Meanwhile, Chicago PMI for January (Briefing.com consensus 45.0) and the final reading of the January Michigan Sentiment Index (Briefing.com consensus 93.2) will cross the wires at 9:45 ET and 10:00 ET, respectively.

Russell 2000 -11.7% YTD

Nasdaq -10.0 YTD

Dow Jones -7.8% YTD

S&P 500 -7.4% YTD