Day Traders Diary

3/3/16

The stock market ended the Thursday affair on a higher note with the S&P 500 gaining 0.4% ahead of tomorrow's release of the February Employment Situation Report. The benchmark index managed to erase a nine-point loss, climbing to its best level by the end of the day. Today's action saw relative strength from commodity-sensitive energy (+1.3%), which managed to outweigh the underperformance of the heavyweight technology (-0.1%) and health care (-0.4%) spaces. Meanwhile, a bid higher in safe haven assets did not detract from an upswing in equities while the greenback lost some ground today.

On the leaderboard, energy (+1.3%) managed to lead the pack while industrials (+0.6%) and financials (+0.5%) followed. Meanwhile, the heavily-weighted health care (-0.4%) and technology (-0.1%) were the only two spaces to end in the red.

The energy sector (+1.3%) showed resilience today as the sector outperformed despite a volatile and ultimately flat showing from WTI crude ($34.57/bbl). On that note, independent oil and gas name ConocoPhillips (COP 38.56, +2.07) managed to add to its advance while oil was up and maintained its footing when oil swung lower. Separately, energy giants Exxon Mobil (XOM 82.40, -0.30) and Chevron (CVX 87.53, +0.39) ended on opposing sides of their flat lines.

Elsewhere, the industrial sector (+0.6%) outperformed today as farm and construction names like Deere (DE 83.67, +1.83) and Caterpillar (CAT 71.75, 2.37) traded higher in sympathy with Joy Global (JOY 16.09, +2.77). Joy boosted sentiment for the sub-group after the company maintained its full-year earnings and revenue guidance, which was viewed as better that feared. Meanwhile, Norfolk Southern (NSC 77.00, +0.00) and Union Pacific (UNP 80.01, +0.51) outperformed, helping the Dow Jones Transportation Average (+1.1%) solidify its position in positive territory for the year (year-to-date +1.2%).

Biotechnology contributed to early and prolonged weakness in the health care sector as the iShares Nasdaq Biotechnology ETF (IBB 264.24, -3.88) surrendered 1.5%. Today's loss in the ETF extended its year-to-date decline to 21.9%. This compares to a 6.8% in the broader sector for the year. Additional weakness in the sector spawned from Abbott Labs (ABT 38.82, -0.52) and Eli Lilly (LLY 73.25, -0.77), which lost 1.3% and 1.0%, respectively.

In the technology space, large-cap constituents pulled back from their recent outperformance as Alphabet (GOOGL 731.59, -7.89) and Microsoft (MSFT 52.35, -0.60) surrendered 1.1% apiece. The two names have climbed 5.1% and 7.5% since the February 11 low in the S&P 500. Separately, the broader technology sector widened its 2016 decline to 3.4%.

The countercyclical sectors were able to recover from some early relative weakness as utilities (+0.6%), consumer staples (+0.5%), and telecom services (+0.3%) ended on their best levels. The three sectors sport the largest year-to-date advances of 6.9%, 2.2%, and 11.2%, respectively.

The Treasury complex ended its day higher despite the afternoon rally in equities. On that note, the yield on the 10-yr note slipped one basis point at 1.83%.

On the currency front, the euro/dollar pair rose 0.9% to 1.0966 while the dollar/yen pair ticked up 0.1% to 113.62, but retreated from its overnight high of 114.28.

Today's trading volume was heavier than the recent average with more than 1.12 billion shares changing hands at they NYSE floor.

Today's economic data included weekly initial claims, Q4 Productivity, Unit Labor Cost data, January Factory Orders, and ISM Services for February:

Initial claims data for the week ending February 27 showed a slight bump in claims to 278,000 (Briefing.com consensus 270,000), up 6,000 from the prior week's unrevised level.

There were no special factors influencing the latest reading, which kept initial claims pinned in the same 250,000 - 300,000 range they have been in since July 2014.

The four-week moving average for initial claims decreased 1,750 to 270,250.

Continuing claims for the week ending February 20 increased 3,000 to 2.257 million, which was basically in-line with the Briefing.com consensus estimate.

The four-week moving average for continuing claims pushed slightly lower to 2.257 million.

The Bureau of Labor Statistics reported nonfarm labor productivity decreased at a 2.2% annual rate during the fourth quarter (Briefing.com consensus -3.3%) versus a preliminary 3.0% decrease.

The updated productivity number was the byproduct of output increasing 1.0% and hours worked increasing 3.2%. From the fourth quarter of 2014 to the fourth quarter of 2015, productivity increased just 0.5%.

Unit labor costs in the nonfarm business sector increased 3.3% in the fourth quarter per the revised data versus a preliminary 4.5% increase. The revision reflected a 1.1% increase in hourly compensation and the 2.2% decrease in productivity.

Unit labor costs have increased 2.1% over the last four quarters.

Factory orders increased 1.6% in January. That was lower than the Briefing.com consensus estimate of 2.0%, but well above the unrevised 2.9% decline for December, which was the largest month-over-month decline since December 2014. Total factory orders are down 3.3% year-over-year.

Excluding transportation, factory orders declined 0.2% on the heels of a downwardly revised 0.9% decline (from -0.8%) for December. On a year-over-year basis, factory orders excluding transportation are down 5.1%.

New orders for manufactured durable goods increased 4.7%, which was down slightly from the 4.9% increase seen in the Durable Goods Orders report for January. New orders for nondefense capital goods excluding aircraft -- a proxy for business investment -- were up 3.4% versus an originally reported 3.9% increase seen in the Durable Goods orders report.

New orders for manufactured nondurable goods declined 1.4% following a downwardly revised 1.1% decline (from -0.8%) for December. That was the third straight monthly decline in orders for manufactured nondurable goods.

Shipments of manufactured durable goods increased 2.0% after an upwardly revised 1.8% decrease (from -2.1%) for December.

The inventory-to-shipments ratio for all manufacturing industries slipped to 1.36 from a downwardly revised 1.37 (from 1.38) for December.

Tomorrow's economic data will be limited to the Employment Situation Report for February (Briefing.com consensus 190k) and the Trade Balance for January (Briefing.com consensus -$44.0 billion).

Nasdaq Composite -6.0% YTD

Russell 2000 -5.3% YTD

Dow Jones -2.8% YTD

S&P 500 -2.5% YTD