Day Traders Diary

3/29/16

The stock market ended its day on a sharply higher note as Fed Chair Janet Yellen boosted equities by striking a decidedly dovish tone. Meanwhile, the outperformance of the heavily-weighted technology (+1.6%) and health care (+1.2%) spaces added support to the move higher. Conversely, a downturn in crude oil and the underperformance of the financial sector (+0.2%) provided for some early weakness in the broader market. The Nasdaq Composite (+1.7%) ended ahead of the S&P 500 (+0.9%) and the Dow Jones Industrial Average (+0.6%).

Equity indices opened their day modestly lower as global bourses struck a risk-off posture ahead of remarks from Fed Chair Janet Yellen. At the same time, a continued tumble in crude oil took some steam out of the equity market. To that point, oil carved out fresh session lows in the morning as investors eyed this evening's weekly API data. However, an increase in risk appetite, courtesy of dovish commentary from Fed Chair Yellen, lifted the energy component off its low. Nevertheless, WTI ended its day lower by 2.7% at $38.32/bbl.

Chair Yellen channeled the dovish undertones from her March 16 press conference as she cited growing risks to the global economy to justify a gradual path in raising rates. Particularly, the Fed Chair mentioned uncertainty over China, low oil prices, and tightening in financial conditions. Furthermore, Fed Chair Yellen pointed to possible shortcomings in monetary policy if another disturbance were to manifest itself. Ms. Yellen noted the "asymmetric" response of monetary policy if economic conditions worsened, given the fed funds rate this close to zero.

All ten sectors ended the day in the green with heavily-weighted technology (+1.6%), utilities (+1.4%), and health care (+1.2%) leading the upside. Meanwhile, the economically-sensitive financial sector (+0.2%) and commodity-sensitive energy (+0.4%) and materials (+0.4%) showed the slimmest gains.

The influential technology sector (+1.6%) outperformed throughout the day, but enjoyed a strong bid following the conclusion of Fed Chair Yellen's speech. Apple (AAPL 107.70, +2.51) and Microsoft (MSFT 54.71, +1.17) outperformed as large names  saw an influx of buying interest. Meanwhile, Yahoo! (YHOO 36.32, +1.09) gained 3.1% after reports indicated that interested parties have until April 11 to submit offers for the web portal's core business and Asian assets.

Biotechnology outperformed in the health care group (+1.2%), as the iShares Nasdaq Biotechnology ETF (IBB 256.61, +4.53) gained 1.8%. To be fair though, the entire space experienced an uptick in buying interest as the beleaguered sector sought to rebound from its 5.7% year to date decline.

In the consumer discretionary space (+0.9%), homebuilders outperformed following above-consensus first quarter results from Lennar (LEN 48.18, +1.48). Meanwhile, Amazon (AMZN 593.86, +13.99) tacked on to its recent winning streak as the retail giant gained 2.4%.

Conversely, rate-sensitive money center banks and life insurance companies underperformed in the financial sector (+0.2%). The groups saw little reprieve from the dovish commentary as their earnings prospects are expected to suffer from lower rates. On that note, MetLife (MET 42.46, -0.54) tumbled 1.3% while Dow component JPMorgan Chase (JPM 59.03, -0.37) fell 0.6%.

On the commodities front, gold spiked following comments from Fed Chair Yellen, which helped diminish inflation expectations. Gold rallied 1.3% to $1,235.80/ozt.

The yield on the 10-yr note ended its day lower by nine basis points to 1.80%.

The U.S. Dollar Index (95.15, -0.79) came under fire as traders again reconsidered the policy divergence trade. The euro gained 0.9% against the dollar to end at 1.1294. Meanwhile, the dollar lost 0.7% to the yen and kicked the pair to 112.70 after trading at 113.46.

Once again, today's participation was above last week's average as more than 945 million shares changed hands on the NYSE floor.

Today's data included the Case-Shiller 20-city Index for January and Consumer Confidence for March:

The Case-Shiller 20-city Home Price Index for January rose 5.7%, which fell in-line with the Briefing.com consensus. This followed the previous month's unrevised increase of 5.7%.

The Conference Board's Consumer Confidence index increased to 96.2 in March from an upwardly revised 94.0 (from 92.2) in February. The March reading was ahead of the Briefing.com consensus estimate, which was pegged at 94.5.

The March reading leaves the series roughly in the middle of a 91-104 range that has been in effect since November 2014.

The improvement in March stemmed from an increase in the Expectations Index (from 79.9 to 84.7), which outweighed a decline in the Present Situation Index (from 115.0 to 113.5).

The report indicated that the strengthening in the Expectations Index was due in part to an improved outlook for the labor market.

Tomorrow's economic data will be limited to the weekly MBA Mortgage Index and the ADP Employment Change for March (Briefing.com consensus 214k), which will be released at 7:00 ET and 8:15 ET, respectively.

Nasdaq Composite -3.2% YTD

Russell 2000 -2.5% YTD

S&P 500 +0.5% YTD

Dow Jones +1.2% YTD