Day Traders Diary

3/23/16

The stock market spent the Wednesday session under selling pressure as a tumble in crude oil fueled a retreat in the broader market. Meanwhile, hawkish commentary from St. Louis Fed President Bullard (FOMC voting member), the underperformance of the heavyweight financial sector (-0.8%), and some below-consensus earnings results led the averages to their worst levels of the day. The Nasdaq Composite (-1.1%) ended the Wednesday affair behind both the S&P 500 (-0.6%) and the Dow Jones Industrial Average (-0.5%).

Before the opening bell, crude oil abandoned the $41.00/bbl price level after the API weekly inventory report showed a larger-than-expected build. Later, the energy component and the major averages carved out fresh session lows following the release of the Department of Energy's more influential stockpile data. The report showed that crude oil levels increased by 9.35 million barrels (consensus 3.09 million barrel) over the last week. By the end of its pit session, oil had surrendered 4.3% ($39.79/bbl).

Separately, hawkish commentary from St. Louis Fed President Bullard added to uncertainty in the broader market. President Bullard argued that rising inflation expectations would call for more rate hikes and that an April hike is not off the table. President Bullard's hawkish note raised speculation that there may be growing dissent on the FOMC with regards to the direction of the fed funds rate.

Heavily-weighted technology (-0.6%), consumer discretionary (-0.6%), health care (-0.6%), and financials (-0.8%) all joined energy (-2.1%) on the bottom of the leaderboard. Conversely, countercyclical utilities (+0.7%) and consumer staples (UNCH) ended above their flat lines.

Commodity-sensitive energy (-2.1%) displayed broad weakness as independent oil and gas names, refiners, and pipeline companies all showed steep losses. The broader sector has tumbled 2.9% thus far this week, but remains higher by 8.5% in the month of March. On a month-to-date basis WTI crude remains up 17.4%.

In the heavyweight technology space (-0.6%), data storage names displayed relative weakness as Western Digital (WDC 48.72, -2.62) and Seagate Technology (STX 34.80, -2.24) plummeted 5.1% and 6.1%, respectively. Additionally, the high-beta chipmakers underperformed, evidenced by the 1.3% decline in the PHLX Semiconductor Index.

The health care space (-0.6%) fell as biotechnology retraced yesterday's rebound effort. The iShares Nasdaq Biotechnology ETF (IBB 254.26, -8.68) surrendered all of its gain from yesterday and trimmed its week-to-date gain to 1.5%. Separately, health care provider and Dow component UnitedHealth (UNH 129.79, +1.77) ended at the top of the price-weighted index.

Meanwhile, Nike (NKE62.44, -2.46) had the worst showing in the Dow. The consumer discretionary name (-0.6%) fell after reporting disappointing top-line results for the third quarter. Elsewhere in the group, media name Time Warner (TWX 70.69, 2.13) plunged 2.9%.

The Treasury complex ended its day broadly higher as the group gained amid the downturn in equities. The yield on the 10-yr note ended its day lower by five basis points at 1.88%.

Today's participation was once again on the lighter side, with fewer than 839 million shares changing hands on the NYSE floor.

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

•The weekly MBA Mortgage Index showed a seasonally adjusted downtick of 3.3%, compared to last week's 3.3% decline.

•New home sales, which are counted when a contract is signed, were at a seasonally adjusted annual rate of 512,000 in February, up 2.0% from an upwardly revised level of 502,000 (from 494,000) for January. The February number was nearly spot-on with the Briefing.com consensus estimate of 511,000.◦As expected, sales in the West saw a huge reversal from the weakness in January, surging 38.5% to a seasonally adjusted annual rate of 151,000. January sales, which fell 32.7%, were reportedly impeded by abnormally wet weather.

◦Notwithstanding the big uptick in the West, total new home sales growth was still only modest due to a 4.1% decline in sales in the South, which is the biggest region for new home sales, accounting for 55% of new home sales in February. On a year-over-year basis, new home sales in the South are down 14.3%.

◦The Northeast saw the biggest drop in February, with sales declining 24.2%, and was followed by the Midwest, which saw sales slump 17.9% from January. Those downturns are apt to be blamed on inclement winter weather conditions. The March report will reveal if that in fact was the case.

◦The median sales price of new houses sold in February was $301,400, up 6.2% from January and up 2.6% from the same period a year ago.

◦At the current sales pace, there is a 5.6-month supply of new homes for sale, which is unchanged from January.

Tomorrow's economic data will include weekly initial claims (Briefing.com consensus 268k) and Durable Goods Orders for February (Briefing.com consensus -2.9%), which will both cross the wires at 8:30 ET. 

•Nasdaq Composite -4.8% YTD

•Russell 2000 -5.2% YTD

•S&P 500 -0.4% YTD

•Dow Jones +0.5% YTD