Day Traders Diary

3/10/16

The stock market endured a shaky session on Thursday as the major averages backed away from recent rebound highs. Today's decline was goaded by a lack of sector leadership from the heavyweight technology (-0.1%) and financial (-0.1%) sectors, uncertainty over whether the European Central Bank has reached its easing limits, and losses in crude oil. The Nasdaq Composite (-0.3%) ended behind the Dow Jones Industrial Average (UNCH) and the S&P 500 (UNCH).

Today's trade took on a sell the news posture despite the ECB's latest policy statement exceeding investors expectations regarding the size and scope of the central bank's easing program. To that point, the ECB lowered its interest rate corridor and expanded the amount of its monthly asset purchases to 80 billion euros. To be fair though, participants likely responded to comments from ECB President Mario Draghi, which cast doubts on future interest rate cuts. As a result, equity markets pulled back from their early highs.

On the domestic front, the two top-weighted sectors of the S&P 500 underperformed the broader market as technology (-0.1%) and the financial sector (-0.1%) trimmed their month-to-date advances to 2.9% and 3.9%, respectively. Meanwhile, doubts regarding the likelihood of a production cap between OPEC and non-OPEC states weighed on crude oil. Consequently, WTI crude surrendered 1.2% ($37.78/bbl) and forced energy (UNCH) near the bottom of the leaderboard.

In the influential technology space (-0.1%), the underperformance of heavyweight components Apple (AAPL 101.17, +0.05) and Microsoft (MSFT 52.05, -0.79) brought the broader sector to its worst level of the day (-1.5%). However, both names were able to recover from their respective lows. Apple saw increased buying interest after it announced an event on March 21, where it is expected to refresh its product line. Separately, the high-beta chipmakers outperformed in the group, evidenced by the 0.5% gain in the PHLX Semiconductor Index.

Asset management companies underperformed in the economically-sensitive financial sector (-0.1%) throughout the day. To that point, Franklin Resources (BEN 36.76, -0.65) tumbled 1.7% in continuation of yesterday's move lower. Elsewhere, the money center banks ended their day on a mixed note with Bank of America (BAC 13.27, +0.13) climbing 1.0% while JPMorgan Chase (JPM 58.61, -0.51) ended lower by 0.9%.

Conversely, health care (+0.1%), consumer discretionary (+0.2%), telecom services (+0.5%), and materials (+0.5%) topped the leaderboard.

In the heavyweight health care space (+0.1%), biotechnology underperformed, evidenced by the 0.8% loss in the iShares Nasdaq Biotechnology ETF (IBB 255.08, -2.05). The ETF has now surrendered 23.0% year-to-date, compared to the 6.9% loss in the broader health care sector.

The U.S. Dollar Index (96.19, -0.98) finished near its session low as the yen and euro maintained their respective advances against the greenback. The euro/dollar pair rose 1.7% to 1.1181 after trading as low as 1.0849. Meanwhile, the dollar/yen tumbled 0.2% (113.14) after trading as high as 114.40.

The Treasury complex moved sharply lower in the morning, retracing a portion of that move in the afternoon. The yield on the 10-yr note fell from its best level of the day (1.95%) to end its session higher by five basis points at 1.93%.

Today's participation fell in-line with the recent average as more than 1.019 billion shares changed hands at the NYSE floor.

Today's economic data included weekly initial and continuing claims and the Treasury Budget for February:

The latest initial claims report has produced more encouraging news that should help highlight the burgeoning divergences between the ECB and the Federal Reserve.

Initial claims for the week ending March 5 were 259,000 (Briefing.com consensus 275,000), a decrease of 18,000 from the prior week.

There were no special factors behind the drop in claims, which are at the lower end of the 250,000 to 300,000 range that has persisted since July 2014. The four-week moving average fell to 267,500 from 270,000.

Continuing claims for the week ending February 27 were 2.225 million (Briefing.com consensus 2.251 million), a decrease of 32,000 from the prior week.

The latest reading left the four-week moving average for continuing claims at 2.252 million versus 2.257 million previously.

The Treasury Budget for February showed a deficit of $192.6 billion, nearly matching the deficit of $192.4 billion for the same period a year ago.

The Treasury data are not seasonally adjusted, so the February deficit cannot be compared to the January surplus of $55.2 billion.

Total receipts in February were $169.1 billion while total outlays were $361.8 billion. Receipts were $29.8 billion more than receipts in February 2015 while total outlays were $30.0 billion more than February 2015.

The 12-month deficit was little changed at $405.52 billion versus $405.26 billion in January.

Tomorrow's economic data will be limited to Febraury Import/Export Prices, which will be reported at 8:30 ET.

Nasdaq Composite -6.9% YTD

Russell 2000 -6.4% YTD

S&P 500 -2.7% YTD

Dow Jones -2.5% YTD