Day Traders Diary

2/9/16

The stock market ended a volatile Tuesday affair with a final hour rally that led the major averages to within striking distance of their flat lines. Today's action was hallmarked by a rebound in the short-term oversold market as global growth concerns, the recent rout in financials, and an oil supply glut remained in focus for much of today's session. The S&P 500 (-0.1%) and the Dow Jones Industrial Average (-0.1%) were able to end their day ahead of the Nasdaq Composite (-0.4%).

Other contributing factors to today's action included:

Uncertainty ahead of Congressional testimony from Fed Chair Janet Yellen on Wednesday and Thursday

Looking ahead to influential earnings from Disney (DIS 92.32, +0.20), Time Warner (TWX 63.21, -4.09), Cisco Systems (CSCO 22.65, -0.28), CBS (CBS 42.65, -1.71), and American International Group (AIG 52.25, -0.05) later this week; and

Awaiting retail sales data for January that will be released on Friday (Briefing.com consensus 0.2%)

Today's early weakness saw concerns tied to Japan's sharp losses, the yield on its government bond turning negative, and ongoing worries about the health of Europe's banking sector. On that note, the simmering sense of angst about the European banking sector's exposure to bad loans and negative interest rates continues to weigh especially heavy on Deutsche Bank (DB 15.38, -0.16), which has surrendered 36.3% since the beginning of 2016.

Oil was driven lower amidst the selling action overseas but rebounded into today's session. The rebound in oil helped lift the market from its opening lows, but a bearish report from the International Energy Agency sent oil lower. The report stated that supply glut concerns may be understated for the first half of 2016 and precedes the API Weekly Crude Inventory Report which will be released today at 16:35 ET. WTI crude tumbled 6.0% to $27.93/bbl.

The stock market struggled through the first half of the session, returning to its opening low around 13:15 ET. However, biotechnology began flashing some relative strength at the start and held its ground even as the market was revisiting its worst level of the day. The subsequent rebound saw the iShares Nasdaq Biotechnology ETF (IBB 248.40, +0.28) surge to a new high while the broader market followed suit. Neither the market nor the ETF could hold its ground, backing away from highs into the close.

Five sectors were able to end their day in positive territory with materials (+1.2%) and health care (+0.7%) showing the largest advance. The remaining advancers posted gains between 0.7% (health care) and 0.4% (utilities).

In the consumer discretionary space (-0.3%), media companies showed relative weakness after Viacom (VIAB 32.86, -8.99).announced a fifth straight quarter of missing sales estimates. The company's miss weighed on fellow media company Time Warner, which fell 5.1% ahead of its earnings release tomorrow morning. On a related note, Netflix (NFLX 86.13, +2.81) managed a 3.4% advance as headwinds for conventional cable and media companies served as a tailwind for the streaming company.

Independent oil and gas names saw the largest losses from the tumble in oil with EOG Resources (EOG 65.59 -2.84) and Anadarko Petroleum (APC 37.24, -2.81) surrendering 4.2% and 7.0%, respectively

In the heavyweight technology space, large-caps Facebook (FB 99.54, -0.21) and Alphabet (GOOGL 701.02, -3.14) were unable to end in positive territory. Meanwhile, Salesforce.com (CRM 57.33, +3.28) climbed 6.1% after Jefferies upgraded the stock to 'Hold' from 'Underperform'.

Today's participation was slightly above the recent average with 1.12 billion shares changing hands at the NYSE floor.

Treasuries ticked higher during the heaviest selling but backed away from these level as the stock market rallied in the final hour. The yield on the 10-yr note ended its day lower by two basis point at 1.73%.

Today's economic data included the Wholesale Inventories report for December and the December Job Openings and Labor Turnover Survey:

Wholesale inventories declined 0.1% month-over-month in December (Briefing.com consensus unchanged) on top of a downwardly revised 0.4% decline (from -0.3%) in November. On a year-over-year basis, wholesale inventories were up 1.9%.

Inventories of durable goods in December declined 0.3% after a 0.4% decline in November. The December downturn was governed by a 0.5% decline in machinery inventories and a 4.4% decline in metals inventories.

The only areas that saw inventories increase were automotive (+0.3%), electrical (+1.0%), and miscellaneous durables (+1.6%).

Inventories of nondurable goods increased 0.1% in December after declining 0.3% in November. The uptick was paced by a 0.8% increase in inventories for drugs and a 2.1% increase in apparel inventories. The only nondurable areas that saw inventories decline in December were petroleum (-7.8%) and alcohol (-1.0%).

Wholesale sales were down 0.3% in December after declining 1.3% in November. The inventory-to-sales ratio held steady at 1.32, yet that was up noticeably from 1.24 in the same period a year ago.

The December Job Openings and Labor Turnover Survey showed that job openings increased to 5.610 million from a revised 5.350 million (from 5.431 million) in November

Tomorrow's economic data will include the weekly MBA Mortgage Index and the Treasury Budget for January crossing the wires at 7:00 ET and 14:00 ET, respectively.

Russell 2000 -15.1% YTD

Nasdaq -14.8% YTD

S&P 500 -9.4% YTD

Dow Jones -8.1% YTD