Day Traders Diary

4/4/16

The major averages began the week on a lower note as the broader market pulled back from its impressive finish to the first quarter. Additional factors to today's decline included a slide in crude oil prices, hawkish remarks Boston Fed President Eric Rosengren (an FOMC voter), and the underperformance of the heavily-weighted technology (-0.5%), financial (-0.5%), and industrial (-1.0%) sectors. The Nasdaq Composite (-0.5%) finished the day behind the Dow Jones Industrial Average (-0.3%), and the S&P 500 (-0.3%).

The equity market drifted lower to begin the day as a slump in the oil patch outweighed a quiet overnight session. Meanwhile, hawkish commentary from Boston Fed President Rosengren pushed the major averages to fresh morning lows as he alluded to a rate hike taking place before the financial markets expect to see one. Furthermore, President Rosengren stated that expectations of one or zero interest rate hikes in 2016 might be "too pessimistic."

Equity indices recovered to their flat lines by the early-afternoon, but were unable to hold these levels as the heavyweight technology (-0.5%), financial (-0.5%), and industrial (-1.0%) sectors extended their losses. Additionally, crude oil spent most of the afternoon drifting towards fresh session lows. WTI crude ended its day lower by 2.8% at $35.72/bbl.

Eight sectors finished their day beneath their flat lines as industrials (-1.0%), materials (-1.0%), and consumer discretionary (-0.9%) led to the downside while health care (+1.0%) and telecom services (+0.7%) sported the only gains of the day.

In the industrial space (-1.0%), heavyweight constituents General Electric (GE 31.23, -0.70) and Danaher (DHR 93.78, -1.1.88) demonstrated relative weakness after both were downgraded from "Outperform" to "Market Perform" at Bernstein.

Meanwhile, the Dow Jones Transportation Average (-0.9%) underperformed as rail names and JetBlue (JBLU 20.41, -0.92) weighed on the index. JetBlue was initially reported to be in contention to acquire Virgin America (VA 55.11, +16.21), but Alaska Air (ALK 78.92, -3.09) won its bid for the company with its offer of $57/share in an all cash transaction.

In the influential technology space (-0.5%), Facebook (FB 112.55, -3.51) weighed on the broader sector after cautious commentary from Deutsche Bank warned against the company's first quarter earnings. Elsewhere, the high-beta chipmakers underperformed, evidenced by the 0.9% decline in the PHLX Semiconductor Index. The index slipped as Intel (INTC 32.00, -0.45) declined 1.4% in response to a downgrade at Exane BNP Paribas.

On top of the leaderboard, the health care space (+1.0%) outperformed to continue its recent rebound effort. The sector has gained 2.3% since the beginning of April, but remains down 3.8% since the beginning of 2016. The iShares Nasdaq Biotechnology ETF (IBB 270.65, +2.34) underperformed the broader sector, but trimmed its 2016 loss to 18.3%. Meanwhile, positive results from Edwards Lifesciences' (EW 105.08, +15.16) PARTNER II Trial of its SAPIEN 3 valve helped boost the broader sector.

The U.S. Dollar Index (94.57, -0.05) ended its session above its session low as the greenback fell against the euro and the yen. The euro ended unchanged against the dollar at 1.1391. Meanwhile, the dollar/yen lost 0.3%, slipping to 111.34.

The retreat in the equities was enough to cause a momentary uptick in the Treasury complex, but the yield on the 10-yr note ended its day unchanged at 1.77%.

Today's participation fell beneath the recent average as fewer than 801 million shares changed hands at the NYSE floor.

Today's economic data was limited to Factory Orders for February:

New orders for manufactured goods in February declined 1.7%, as expected, marking the third time in the last four months that they have been down.

January was the exception in that string, yet it was shown today as well that factory orders for January were up only 1.2% versus a previously reported 1.6% increase.

Excluding transportation, factory orders declined 0.8% on top of a downwardly revised 0.6% decline in January (from -0.2%) and are down 3.4% year-over-year.

The downturn in orders in February, coupled with the downward revisions for January, underscore an economy that has failed to gain any excitable momentum in the first quarter after growing at an annualized rate of just 1.4% in the fourth quarter.

The inventories-to-shipments ratio was unchanged at 1.37.

Tomorrow's economic data will include the February Trade Balance (Briefing.com consensus -$46.20 billion) and the ISM Service Index for March (Briefing.com consensus 54.0), which will be released at 8:30 ET and 10:00 ET, respectively.

Russell 2000 -2.4% YTD

Nasdaq Composite -2.3% YTD

S&P 500 +1.1% YTD

Dow Jones +1.8% YTD