Day Traders Diary

2/10/16

The major averages ended Wednesday's affair under heavy selling pressure, which left the Dow Jones Industrial Average and S&P 500 in negative territory when the closing bell rang.  The Nasdaq managed a modest gain, yet still gave back a huge chunk of an earlier 101-point gain. Once again, trade centered on troubles inthe oil patch, concerns over global and domestic growth, currency swings, and the future path of the fed funds rate. Today saw limited articulation of that final point as Fed Chair Yellen gave her semiannual monetary policy report before the House Financial Services Committee.

The major averages hit session highs within the first hour of trading but were unable to hold those levels as participants once again showed a propensity to sell into strength. The financial sector, for instance, was an early leader -- and an influential one at that -- as it followed in the footsteps of European banks, which attracted a bargain-hunting bid on Wednesday. Deutsche Bank (DB 16.21, +0.83), which has been under heavy selling presure of late on investor concerns about its financial condition, helped lead that effort. Financials (-0.5%) here, though, were unable to hold their gains and helped precipitate the late-day selling interest.

Oil prices attempted an early rally, climbing above $29.00/bbl after the weekly inventory report from the EIA report showed a draw of 0.754 million barrels. That rally was short-lived though and the commodity soon rolled over.  The disappointing price action there after an ostensibly bullish catalyst took some wind out of the stock market's sails. WTI crude settled the day down 1.6% at $27.54/bbl.  The S&P 500 energy sector declined 0.5%.

Fed Chair Yellen's testimony was largely a middle-of-the-road presentation as she made it sound as if the Fed is open to holding off on another rate hike at its March meeting; however, she didn't make it sound as if the Fed is willing to concede anything past that meeting.  One notable thing she said in the Q&A portion of her testimony was that she doesn't think it will be necessary to cut rates soon, yet she did add the Fed will do what is necessary to achieve its goals.

By and large, the response to Ms. Yellen's presentation was mixed and was reflected in the S&P closing the day relatively flat.

Healthcare (+0.9%) and technology (+0.4%) were the only sectors that were able to end the day with a gain, yet both groups ended the session well off their highs (+2.4% and +1.8%, respectively). The technology group saw leadership from large-cap components like Facebook (FB 101.00, +1.46) and Microsoft (MSFT 49.71, +0.43) while health care could attribute its relative strength to the biotechnology stocks.

The commodity-sensitive materials sector (-1.0%) ended the day with the worst performance.

At their highs of the day, the Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 were up 1.2%, 2.4%, and 1.3%, respectively.

There were 1.05 billion shares traded at the NYSE, which was a bit light of the recent average.

Treasuries traded in a narrow range for most of the session, but came on strong in the afternoon and rolled to their best levels of the session as stocks sold off in the final hour of trading.  The yield on the 10-yr note dropped four basis points to 1.69%.

Strikingly, the late selling in the equity market took place alongside a strengthening in the Japanese yen.  The stronger yen has been problematic for Japanese exporters and has been a catalyst for heavy selling in Japan's stock market this month.

Today's economic data included the weekly MBA Mortgage Index and the Treasury Budget for January:

Mortgage applications were up 9.3% in the latest week driven by a 16.0% surge in refinancing applications.

The January Treasury Budget showed a surplus of $55.2 billion versus a deficit of $17.5 billion for the same period a year ago. This Treasury data is not seasonally adjusted, so the January surplus cannot be compared to the December deficit of $14.4 billion.

Total receipts in January were $313.6 billion while total outlays were $258.4 billion. Receipts were $6.8 billion more than January 2015 receipts while total outlays were $65.9 billion less than January 2015. The 12-month deficit decreased by $72.7 billion to $405.3 billion.

Tomorrow's economic data is limited to the weekly Initial Claims (Briefing.com consensus 280k). Tomorrow will also conclude Fed Chair Yellen's semiannual monetary policy report before the House Financial Services Committee

Russell 2000 -15.2% YTD

Nasdaq -14.5% YTD

S&P 500 --9.4% YTD

Dow Jones -8.7% YTD