Day Traders Diary

4/13/16

The stock market ended the Wednesday affair on a higher note as better than feared earnings results from JPMorgan Chase (JPM 61.79, +2.51) and CSX (CSX 26.03, +1.04) boosted their respective sectors and the broader market. Additionally, today's trade saw a downturn in crude oil, below-consensus readings of economic data, and the outperformance of the heavily-weighted financial (+2.3%), industrial (+1.4%) consumer discretionary (+1.4%), and technology (+1.4%) spaces. The Nasdaq Composite (+1.6%) ended its day ahead of both the Dow Jones Industrial Average (+1.1%) and the S&P 500 (+1.0%).

Today's session started on a higher note as equity futures and international bourses responded to an above-consensus reading of exports out of China (+11.5% year-over-year; consensus +2.5%). Meanwhile, positive earnings reports at home outweighed some negative economic data and a downturn in crude oil. On that note, March PPI, Retail Sales for March, and Business Inventories for February all either came in below-consensus or contained negative revisions to prior reports.

The major averages slipped from their highs after the release of the Department of Energy's weekly stockpile data. Weekly inventories showed that crude oil stockpiles rose by 6.63 million barrels (consensus 1.85 million barrels). As a result, WTI crude ended its day lower by 1.0% at $41.70/bbl. To be fair though, the energy component has gained 8.9% in April, and the potential production cut meeting will be held on Sunday.

The downturn in crude oil did not cause the broader market to rollover as heavily-weighted sectors maintained momentum throughout the day. On that note, the beleaguered financial sector (+2.3%) ended its day in the front of the pack while industrials (+1.4%), consumer discretionary (+1.4%), and technology (+1.4%) followed.

The economically-sensitive financial sector (+2.3%) moved higher in sympathy with JPMorgan Chase. The company reported a top and bottom-line beat in the first quarter. However, the company's report didn't paint a rosy picture, as revenue declined 3.7% year-over-year and the company increased its loan loss provisions from $959 million to $1.80 billion. Elsewhere in the group, Citigroup (C 44.25, +2.35) outperformed after its "living will" was approved by regulators. The company has until July 1, 2017 to revise shortcomings in its plan.

In the industrial space (+1.4%), rail names and airlines displayed relative strength today. Among the rail names, CSX outperformed after reporting bottom-line results that fell in-line with analysts' expectations. Elsewhere, Delta Airlines (DAL 48.04, +1.41) gained 3.0% ahead of its earnings release tomorrow morning.

Media names and electronics retailers outperformed in the consumer discretionary space (+1.4%) as large cap Disney (DIS 99.48, +2.13) gained 2.2%. Meanwhile, Best Buy (BBY 32.16, +1.34) and GameStop (GME 31.47, +1.38) jumped a respective 4.4% and 4.6%.

Countercyclical telecom services (-1.0%), consumer staples (-0.8%), and utilities (-0.7%) finished beneath their flat lines while energy (+0.4%) and health care (+0.9%) finished with the slimmest gains.

On the central bank front, the Federal Reserve released its April Beige Book, which described overall economic activity across the twelve Fed Districts as expanding within a "modest" or a "moderate" range. Most districts reported job gains, which in turn looks to be leading to an uptick in wage growth. Elsewhere, manufacturing activity increased in most districts, although, expectations for continued expansion remained mixed. As for inflation, the Beige Book described continued optimism for slow and steady growth in 2016.

The U.S. Dollar Index (94.79, +0.83) ended beneath its session high as the dollar trimmed its gain against the euro and the yen. The euro/dollar pair slipped 0.9% against the dollar and finished at 1.1277. The dollar/yen pair ended its day at 109.29 (+0.6%).

The Treasury complex concluded its day on its highs as the yield on the 10-yr note sank two basis points to 1.76%.

Today's participation was above the recent average as more than 983 million shares changed hands on the NYSE floor.

Today's economic data included the weekly MBA Mortgage Index, March Core PPI, Retail Sales for March, February Business Inventories, and the Fed's Beige Book for April:

The weekly MBA Mortgage Index showed a seasonally adjusted increase of 10.0%

The Producer Price Index for final demand declined 0.1% (Briefing.com consensus +0.3%).Excluding food and energy, producer prices were also down 0.1% (Briefing.com consensus +0.2%) after being unchanged in February.

The March data underscore that inflation continued to run cool at the producer level, which should presumably help keep consumer prices in check.

A 0.2% decline in prices for final demand services acted as a drag on the final demand index, but was offset in part by a 0.2% increase in prices for final demand goods.

On an unadjusted basis, prices for final demand are down 0.1% year-over-year. Final demand prices less food and energy are up 1.0% year-over-year on an unadjusted basis.

The Retail Sales report for March was pretty lackluster, offering further evidence that consumer spending and economic activity overall was pretty weak in the first quarter.

Plagued by a 2.1% decline in auto sales, total retail sales declined 0.3% in March (Briefing.com consensus +0.1) after being unchanged in February.

Excluding autos, retail sales were up a weaker than expected 0.2% (Briefing.com consensus +0.4%) after also being unchanged in February. A 1.4% gain in building material sales and a 0.9% jump in gasoline station sales helped offset a 0.9% drop in apparel sales and a 0.8% decline in sales at food services and drinking places.

Core retail sales, which exclude auto, gasoline station, and building material sales, were flat following a 0.4% increase in February. Core retail sales factor into the computation for the goods component of personal consumption expenditures in the GDP report. So, it's not very good news here.

Total business inventories declined 0.1% in February (Briefing.com consensus -0.1%). The negative surprise with this report was the downward revision to January business inventories, which were revised to show a decline of 0.1% versus a previously reported reading of being unchanged.

The decline in business inventories in February combined with the decline in January will factor negatively in the computation for first quarter GDP, which stood most recently at just 0.1% according to the Atlanta Fed's GDP Now model forecast.

Manufacturers' inventories (-0.4%) and merchant wholesaler inventories (-0.5%) were already known. Retailer inventories were the only unknown and they increased 0.6% on top of a 0.4% increase in January.

The breakdown of retailer inventories showed increases in all major areas, with the exception of furniture, home furnishings, electronic and appliance stores (-0.1%). The biggest uptick in inventories was seen for motor vehicle and parts dealers (+1.3%).

The total business inventory-to-sales ratio stood at 1.41 in March, which was unchanged from the upwardly revised reading for February (from 1.40) and up from 1.37 in the same period a year ago.

Tomorrow's economic data will include Core CPI for March (Briefing.com consensus +0.2%) and weekly initial claims (Briefing.com consensus 268k), which will both cross the wires at 8:30 ET. 

Nasdaq Composite -1.2% YTD

Russell 2000 -0.6% YTD

S&P 500 +1.9% YTD

Dow Jones +2.8% YTD