Day Traders Diary

2/24/16

The stock market ended the Wednesday affair on a positive note as the major indices managed to recover from steep morning losses. Today's trade saw equity markets moving in tandem with oil while heavily-weighted sectors like financials (-0.2%) and industrials (+0.1%) recovered from respective morning losses of 2.2% and 1.8%. The Nasdaq Composite (+0.9%) ended its session ahead of the S&P 500 (+0.4) and the Dow Jones Industrial Average (+0.3%).

This morning oil conceded to heavy selling pressure as a bearish reading from the weekly API inventory report and concerns over the effectiveness of a supply cap weighed on the commodity. The energy component found room to rally after the Department of Energy reported a gasoline inventory draw of 2.236 million barrels compared to the forecast 1.033 million barrel draw. Additionally, largely in-line results regarding a crude oil build (3.502 mln barrels vs est. 3.427 mln) bolstered the commodity. WTI crude rallied off its session low of $30.70/bbl to end its day higher by 1.3% at $32.21/bbl.

As a result of this rally in crude oil, the commodity-sensitive energy space (+0.9%) was able to move from laggard to leader. Independent oil and gas companies saw the largest rebound but Chevron (CVX 85.27, +0.36) and Exxon Mobil (81.52, +0.29) were able to end their day with gains of 0.4% apiece. Separately, Chesapeake Energy (CHK 2.69, +0.50) surged 22.8% after reporting above consensus bottom-line results and announcing plans to divest $700 million in assets by the end of the second quarter.

The early underperformance of heavily-weighted sectors contributed to the sharp opening losses as technology (+0.9%) and consumer discretionary (+0.6%) weighed on the benchmark index. Meanwhile, financials (-0.2%) and industrials (+0.1%) underperformed the broader market throughout the day.

In the financial sector, money center banks demonstrated relative weakness after JPMorgan Chase (JPM 56.14, +0.02) admitted Tuesday that it increased its loan loss reserves for its oil, gas, and mining exposures. The broader financial sector was to recover from a 2.2% loss to end its day down 0.1%.

In the heavyweight technology space, top-weighted constituent Apple (AAPL 96.10, +1.41) gained 1.5% while the high-beta chipmakers outperformed. The PHLX Semiconductor Index climbed 1.4% today as SanDisk (SNDK 69.90, +3.29) led the index. Separately, HP (HPQ 10.82, +0.51) jumped 5.0% ahead of its earnings report after today's closing bell.

Retail names boosted the consumer discretionary space after TJX (TJX 74.24, +1.55) reported an earnings beat while Target (TGT 76.94, +2.95) impressed investors with above-consensus guidance.

The Dow Jones Transportation Average (-0.5%) underperformed with components Avis Budget (CAR 22.04, -7.95) and Matson (MATX 38.39, -1.84) displaying relative weakness after disappointing investors with their earnings reports and guidance. Meanwhile, industrial large-caps General Electric (GE 28.96, -0.26) and Boeing (BA 115.59, -1.31) also underperformed.

Today's trade saw a steady retreat from safe haven assets as the Treasury complex slid to its lows. The yield on the 10-yr note ended higher by two-basis points at 1.74%. On a related note, the U.S. Dollar Index (97.47, -0.02) climbed back to its flat line as the safe haven yen pulled back from its session high (111.07). The dollar/yen pair ended at 111.91. The euro also fell from its high (1.1044), pressuring the euro/dollar pair to 1.1012 (-0.1%).

Today's participation fell beneath the recent average with fewer than 1.012 billion shares changing hands on the NYSE floor.

Today's economic data was limited to the weekly MBA Mortgage Index and the January New Home Sales Report:

The weekly MBA Mortgage Index showed a seasonally adjusted decrease of 4.3% in mortgage applications.

Sales of new single-family houses in January ran at a seasonally adjusted annual rate of 494,000 (Briefing.com consensus 523,000)

That was 9.2% below the sales rate in December and new home sales in January were down 5.2% year-over-year.

Weather can't really be blamed as the culprit for the drop in sales for a few reasons. First, the Northeast, which was struck by a blizzard late in the month, saw sales increase 3.4%. Secondly, the West, which did not have to contend with blizzard conditions, saw a huge 32.1% month-over-month decline in new home sales. Separately, sales were down 5.9% in the Midwest and up 1.8% in the South.

Pricing can't be thought of as the culprit either. The median sales price of $278,800 was down 5.8% from the prior month and down 4.5% year-over-year.

This January downturn, then, has the appearance at first blush of simply being the result of a drop off in demand. As a reminder, new home sales are counted when the contract is signed versus existing home sales which are counted when the sale is closed.

At the sales pace seen in January, the inventory of new homes for sale stretched to a 5.8-months supply from 5.1 months in December. That is the highest inventory level since September 2015.

Separately, St. Louis President and Federal Open Market Committee voting member James Bullard will speak at 19:00 ET.

Tomorrow's economic data will include the 8:30 ET release of weekly initial claims (Briefing.com consensus 270k) and Durable Orders for January (Briefing.com consensus +2.0%). Meanwhile, the FHFA Housing Price Index for December will cross the wires at 9:00 ET.

Russell 2000: -10.1% YTD

Nasdaq -9.3% YTD

S&P 500 -5.6% YTD

Dow Jones -5.4% YTD