Day Traders Diary

2/8/16

The stock market ended its first session of the week with moderate losses despite strong buying interest in the final hour of trade. Today's trade was dominated by concerns regarding slowing global growth, a decline in oil, and the ability to sustain further fed funds rate hikes. Trade saw a flight from risk assets to safe-haven investments amid growing uncertainty. The Nasdaq Composite (-1.8%) ended its day behind both the S&P 500 (-1.4%) and the Dow Jones Industrial Average (-1.1%).

Over the weekend, China released data that showed a $100 billion decline in its foreign exchange reserves, moving the reserves to their lowest level since May 2012. This weighed on global markets as they began to question how much longer the People's Bank of China can prop up the yuan. On a related note, China's Shanghai Composite is closed for the week for the Lunar New Year.

Ahead of today's session European regional indices responded to growing uncertainty of the future of the fed funds rate, which was blurred after the January Employment Situation Report revealed misses in headline metrics but could still be used to justify rate increases due to shrinking unemployment and wage growth. European markets followed our rout with a day-long decline of their own. European banks led the decline with Deutsche Bank (DB 15.54, -1.35) falling 8.0% amid concerns over the state of the bank's balance sheet and derivative exposure. The decline widened Deutsche Bank's 2016 dive to 38.7% and was so jarring that the bank came out with a press release defending its capital position, saying it has roughly EUR1 billion in 2016 payment capacity, enough to pay EUR350 million in Tier 1 coupons that will mature in April.

Oil succumbed to early selling pressure from the European session and surrendered the $30.00/bbl during U.S. pre-market trading. WTI crude was able to reclaim this level during today's session but was unable to close its pit session above that mark. WTI crude settled lower by 3.8% at $29.94/bbl. Elsewhere in commodities, gold remained on a torrid pace, extending its 2016 gain to 6.7% amid growing fears that the Fed may have committed a policy error. Today, the yellow metal climbed 3.5% to $1,197.50/ozt.

The commodity-sensitive materials sector (-2.7%) ended its day behind the other groups with financials (-2.6%) and consumer discretionary (-2.0%) following. The countercyclicals led throughout the day with telecom services (-0.4%) and consumer staples (-0.3%) showing the slimmest losses.

The financial sector mirrored concerns in Europe as the economically-sensitive group retreated following the decline in European banks. Money center banks Bank of America (BAC 12.27, -0.68) and Citigroup (C 37.81, -2.05) showed relative weakness with respective losses of 5.3% and 5.1%. Including today's performance, the group has declined 6.2% in February and 14.6% since the end of 2015.

The heavyweight technology space (-1.6%) recovered from early weakness with market cornerstones leading a rally during the final hour. Facebook (FB 99.75, -4.32), and Microsoft (MSFT 49.41, -0.75) climbed off their worst levels, but still ended lower by 4.2% and 1.5%, respectively. Yelp (YELP 16.06, -2.04) surrendered 11.3% after releasing its Q4 earnings during the session. The company reported an EPS miss on in-line revenue. Yelp also announced that CFO Rob Krolik will be stepping down by December 15 or when a replacement is found.

Biotechnology continued to show relative weakness in the health care space (-1.4%), evidenced by the 3.2% decline in the iShares Nasdaq Biotechnology ETF (IBB 248.12, -8.12).

In the commodity sensitive energy space, Chesapeake Energy (CHK 2.21, -0.85) plunged 27.8% after early reports stated that the company hired attorneys for restructuring measures. The stock rebounded slightly after the company announced that they will not be pursuing bankruptcy and that Kirkland & Ellis will advise them on ways to strengthen its balance sheet.

On the currency front, the yen rallied 0.9% against the dollar in safe-haven trade. The pair traded at 115.70 at the close of U.S. trade.

Safe-haven investments outperformed today with gold and bonds rallying. The yield on the 10-yr ended the session lower by eight basis points at 1.76%

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 noteworthy data today and tomorrow's economic news will be limited to the 10:00 ET release of the Wholesale Inventories report for December (Briefing.com consensus 0.0%).

Russell 2000 -14.7% YTD

Nasdaq -14.5% YTD

S&P 500 -9.3% YTD

Dow Jones -8.0% YTD