Day Traders Diary

2/2/16

 The stock market ended its Tuesday affair under heavy selling pressure as the major indices followed oil's rout to close near their session lows. The tech-heavy Nasdaq (-2.2%) ended behind both the S&P 500 (-1.9%) and the Dow Jones Industrial Average (-1.8%).

Today's selloff was underpinned by:

Substantial losses in biotechnology

Weakness from market cornerstones Apple (AAPL 94.48, -1.95) and Exxon Mobil (XOM 74.59, -1.70)

The market's inability to capitalize on positive earnings from Alphabet (GOOG 764.65, +12.65); and

Hawkish remarks from Kansas City Fed President and FOMC voting member Esther George

Ahead of today's session, oil sold off in the wake of yesterday's disappointing manufacturing data, diminishing speculation for production cuts between OPEC and non-OPEC states, and Iran announcing that it will be increasing its crude exports to 2.3 million barrels a day in its next fiscal year. Oil was able to close its day off its low but ended beneath the $30.00/bbl price level. WTI crude closed its pits session lower by 5.3% at $29.95/bbl.

The energy sector (-3.3%) rounded out the leaderboard while financials (-2.6%) and industrials (-2.0%) followed. On the flipside, utilities (+0.4%) and materials (-0.7%) outperformed.

In the heavily-weighted technology space (-2.0%), Alphabet was unable to lift the broader sector or the market despite its earnings beat. However, the company surpassed Apple in terms of market capitalization in the S&P 500. The high-beta chipmakers showed relative weakness today, as the PHLX Semiconductor Index declined 3.4%. The group saw headwinds from a Goldman Sachs research note, which cut smartphone growth estimates for 2016 and 2017. This note was consistent with Qualcomm's (QCOM 43.15, -2.96) Q1 guidance, which forecast a 16.0% to 25.0% drop in chipset sales year-over-year.

Large-cap Exxon Mobil fell 2.2% after reporting that revenue declined 31.5% year-over-year in its Q4 earnings report. This set the tone for the beleaguered energy sector as fellow energy giant Chevron (CVX 81.24, -4.05) tumbled 4.8%. Including today's performance, the group has fallen 8.0% in 2016.

Biotechnology continued to anchor the health care space (-1.5%), evidenced by the 2.8% decline in the iShares Nasdaq Biotechnology ETF (IBB 261.01, -7.52). Component Gilead (GILD 82.70, -1.34) narrowly underperformed the group ahead of the company's earnings results after today's close.

Money center banks faced continued selling, hurt by concerns surrounding their earnings prospects. Bank of America (BAC 13.23, -0.73) and JPMorgan Chase (JPM 57.03, -1.83) declined 5.2% and 4.9%, respectively. On a related note, the yield on the benchmark note is down more than 40 basis points (from 2.29%) since the Fed's rate hike decision on December 16th. Treasuries ended today on their highs as selling pressure in equities continued throughout the second half of the session. The yield on the 10-yr note ended nine basis points lower at 1.86%.

Despite the defensive positioning in the bond market, Kansas City Fed President and FOMC voting member Esther George stated that "economic growth, steady job gains and modestly higher core rates of inflation will warrant further [rate] increases" during her speech.

Today's participation was true to recent form with more than a billion shares changing hands at the NYSE floor.

Investors did not receive any economic data today, but auto and truck sales were reported throughout today's session.

Tomorrow's economic data includes the weekly MBA Mortgage Index and the ADP Employment Change for January (Briefing.com consensus 190k) being released at 7:00 ET and 8:15 ET, respectively. Meanwhile, January's ISM Services Index (Briefing.com consensus 55.0) will cross the wires at 10:00 ET.

Russell 2000 -11.2% YTD

Nasdaq -9.8% YTD

Dow Jones -7.3%

S&P 500 -6.9%