Day Traders Diary

2/1/16

The major averages were able to end their first session of the week on a mixed note despite starting this morning under some selling pressure. Today's session saw a divergence with the recent tradition of equities trading in lockstep with the direction of oil, as the major indices staged a rally off their lows despite a larger loss in crude. The tech-heavy Nasdaq (+0.1%) was able to end ahead of the S&P 500 (UNCH) and the Dow Jones Industrial Average (-0.1%).

Equities charged back to their flat lines during afternoon action with the move stemming in part from an understanding that the coming week has a number of potential catalysts that could move the market. Conversely, a number of negative announcements were likely not bad enough to elicit a defensive response. Factors that contributed to today's action included:

Fed Vice Chairman Fischer's speech which provided little additional insight on last week's policy statement

The final member of F.A.N.G., Alphabet (GOOGL 770.77, +9.42) rallying ahead of its earnings report

Non-farm payroll data is set to be released on Friday; and

Weak economic data internationally and domestically which may delay additional rate hikes

China released two weak manufacturing figures overnight with Manufacturing PMI coming in at 49.4 (expected 49.6) and the Caixin PMI survey hitting 48.4 (expected 48.0). Both data points showed further contractions in China's manufacturing sector but were anticipated to be weaker. This data worked to depress global equity markets, U.S. futures, and oil prices. To be fair though, growing skepticism of potential production cuts from OPEC and non-OPEC states may have worked to further depress prices. WTI crude ended its pits session lower by 6.2% at $31.65/bbl.

Seven of ten sectors were able to finish their trading day in positive territory with countercyclical telecom services (+0.9%) and utilities (+1.0%) leading the pack. Meanwhile, energy (-1.9%) financials, (-0.6%), and industrials (-0.3%) were unable to move into positive territory.

The energy space underperformed during today's session as commodity prices continued to weigh on the group. While independent oil and gas companies like Anadarko Petroleum (APC 38.25, -0.84) faced larger headwinds, even large-cap Exxon Mobil (XOM 76.29, -1.56) felt pressure ahead of its earnings release tomorrow morning. Meanwhile, pipeline company Kinder Morgan (KMI 15.19, -1.26) declined 7.7% in the wake of oil's rout and a 6.5% decline in natural gas ($2.15/MMbtu).

Financials continued their decline from January as they underperformed on the possible inability for the broader market to support a rate hike. Money center banks underperformed in response, with Bank of America (BAC 13.96, -0.18) and JPMorgan Chase (JPM 58.86, -0.64) sliding 1.3% and 1.1%, respectively.

In the heavily-weighted technology space, Facebook (FB 115.09, +2.88) continued to outperform after disclosing its fourth quarter beat last week. Meanwhile, Alphabet showed relative strength as it climbed 1.2%.

On the merger and acquisition front, Alere (ALR 54.11, +16.91) climbed 45.5% on news that the company will be acquired by Abbott Laboratories (ABT 38.45, +0.60) for $56.00 a share. Elsewhere, Dominion (D 70.18, -1.99) agreed to acquire Questar (STR 24.99, +4.60) for $25 per share.

Today's participation was slightly below recent averages with less than a billion shares changing hands at the NYSE floor.

Treasuries ended their day near their lows as equities rallied. The yield on the benchmark note ended higher by three basis points at 1.95%.

Today's economic data has included PCE Prices for December, Construction Spending for December, and the January ISM Index.

Personal income rose 0.3% in December (Briefing.com consensus +0.2%)

Personal spending was unchanged (Briefing.com consensus +0.2%).

Personal consumption expenditures decreased $0.7 billion, or less than 0.1%, so with rounding it gets logged in the report as 0.0 for the month-over-month change.

The personal savings rate jumped to 5.5% from 5.3% in November and stands at its highest level in three years.

PCE Price Index declined 0.1% month-over-month while the core PCE Price Index, which excludes food and energy, was unchanged (Briefing.com consensus +0.1%) after a 0.2% increase in November.

December readings, the PCE Price Index is up 0.6% year-over-year versus 0.4% in November and the core PCE Price Index is up 1.4%, holding steady with the year-over-year reading for November.

The January ISM Index, edged up to 48.2 for January (Briefing.com consensus 48.3)from a downwardly revised reading of 48.0 (from 48.2) for December.

January marked the fourth straight month that the ISM Index has been below 50.0. (The dividing line between expansion and contraction). the manufacturing sector has been hurt by the dollar's strength, weak global demand, and falling commodity prices that have crimped investment spending.

New orders and production indexes reached expansion territory. The new orders index increased to 51.5 from 48.8 while the production index rose to 50.2 from 49.9.

The imports index also logged a notable increase, rising to 51.0 from 45.5. Conversely, the employment index fell to 45.9 from 48.0, and the export index dropped to 47.0 from 51.0.

Construction spending increased just 0.1% in December (Briefing.com consensus +0.5%)

Construction spending for November was revised down to a decline of 0.6% from a previously reported decline of 0.4%.

Private construction spending was the big drag in December. It declined 0.6% month-over-month due to a 2.1% drop in nonresidential construction. Residential construction was up 0.9% month-over-month.

Public construction spending, which accounted for 27% of total construction spending in December, increased 0.9% on the back of a 2.2% uptick in nonresidential spending.

There will be no economic data of note tomorrow.

Russell 2000 -9.0%

Nasdaq -7.7%

Dow Jones -5.6%

S&P 500 -5.1%