Day Traders Diary

4/14/16

The stock market ended Thursday on a flat note as the indices surrendered their slim intraday gain during the final hour. Meanwhile, better than feared earnings reports from the beleaguered financial sector (+0.3%) lent support to the major averages for a second day in a row. Additionally, today's action also featured the latest inflation data for the month of March, and continued trepidation regarding this quarter's corporate earnings reports. The Dow Jones Industrial Average (+0.1%) ended its day ahead of both the S&P 500 (UNCH) and ahead of the Nasdaq Composite (UNCH).

The trading day began on a choppy note as investors weighed quarterly earnings reports from names like Wells Fargo (WFC 48.79, -0.24), Bank of America (BAC 14.14, +0.35), and BlackRock (BLK 354.91, +6.62) against their diminished expectations for the first quarter. At the same time, March CPI data came in cooler-than-expected, which could justify the Fed leaving rates unchanged at the April 26-27 meeting. As a side note, this is the last inflation reading ahead of that meeting.

Risk appetite managed to pick up as the session went on, and the benchmark index was able to extend out of its initial six-point trading range. By the end of the session, six sectors traded above their flat lines as energy (+0.4%) led financials (+0.3%), telecom services (+0.3%), and health care (+0.1%).

In the economically-sensitive financial sector (+0.3%), money center banks again helped lead the advance as Bank of America (BAC 14.14, +0.35) gained 2.5% after reporting a bottom-line beat on light revenue. The company attributed part of the revenue shortfall to a 16.0% decline in trading revenue for the quarter. Meanwhile, Wells Fargo (WFC 48.79, -0.24) ended its day beneath its flat line as investors weighed a $200 million increase to its loan loss reserves against a top and bottom-line beat. The broader sector has gained 4.3% this week, but remains down 3.7% on the year.

Baker Hughes (BHI 43.18, +1.88) displayed relative strength in the energy space (+0.4%). The company rallied 4.6% after reports indicated that Carlyle (CG 17.05, -0.19) is discussing a potential acquisition of $7 billion worth of assets from the company and Halliburton (HAL 38.38, +0.07). This deal would help Baker Hughes and Halliburton complete appropriate divestments to aid their proposed merger. Separately, WTI crude ended its day lower by 0.6% at $41.45/bbl.

In the health care space (+0.1%) large cap components Bristol-Myers (BMY 67.87, +0.30) and Merck (MRK 56.45, +0.49) outperformed. Bristol-Myers gained 0.4% after announcing that the FDA accepted priority review of its Hodgkin's Lymphoma drug. Meanwhile, Merck outperformed after its Zepatier medication received positive results in a head-to-head clinical trial against a competitor's medication.

Conversely, four sectors ended in the red with consumer staples (-0.5%), materials (-0.1%), utilities (-0.1%), and technology (-0.1%) rounding out the leaderboard. In the technology space (-0.1%), the high-beta chipmakers underperformed after Taiwan Semiconductor (TSM 25.30, -0.87) issued below-consensus guidance for the second quarter.

The U.S. Dollar Index (94.96, +0.21) rebounded throughout the day after the below-consensus CPI readings pressured the greenback. The dollar ended its day 0.1% higher against the yen at 109.40 while the euro/dollar pair finished lower by 0.2% at 1.1258.

The Treasury complex ended its session off its low with the yield on the 10-yr note ending higher by three basis points at 1.79%.

Today's participation was above the recent average as more than 882 million shares changed hands on the NYSE floor.

Today's economic data included Core CPI for March and weekly initial claims:

The Consumer Price Index (CPI) for March showed only a 0.1% increase for the all items index (Briefing.com consensus +0.3%). Similarly, core CPI, which excludes food and energy, was up only 0.1% (Briefing.com consensus +0.2%) after a 0.3% increase in February.

With the March data, total CPI was up 0.9% over the last 12 months versus 1.0% in February while core CPI rose 2.2% versus 2.3% in February.

The moderation in those year-over-year growth rates will likely draw the Fed's attention as a basis for holding off on a rate hike at the April 26-27 meeting. This CPI report is the last inflation report ahead of that meeting.

The energy index (+0.9%) drove the increase in the all items index, logging its first increase since November. The food index was down 0.2% following a 0.2% increase in February.

Driving the modest gain in core CPI were the indexes for shelter, recreation, medical care, education, tobacco, and personal care, although increases there were offset to a large extent by declines in the indexes for apparel, airline fares, communication, household furnishings, and used cars and trucks. The apparel index, in particular, was down 1.1% after a 1.6% increase in February.

Initial claims for the week ending April 9 were 253,000 (Briefing.com consensus 268,000), a decrease of 13,000 from the prior week.

There were no special factors influencing initial claims, which logged their 58th straight week below 300,000 -- the longest streak since 1973!

The four-week moving average for initial claims decreased by 1,500 to 265,000.

Continuing claims for the week ending April 2 dropped to 2.171 million, a decrease of 18,000 from the prior week.

The four-week moving average for this series stands at 2.178 million -- the lowest level since November 18, 2000.

Tomorrow's economic data will include the 8:30 ET release of Empire Manufacturing for April (Briefing.com consensus 2.3). Meanwhile, Industrial Production (Briefing.com consensus +0.0%) and Capacity Utilization (Briefing.com consensus 75.5%) for March will be reported at 9:15 ET. Finally, the day's data will be capped off with the preliminary reading of the University of Michigan's Consumer Sentiment Index for April (Briefing.com consensus 92.0) and the Net Long-Term TIC Flows for February, which will cross the wires at 10:00 ET and 16:00 ET, respectively.

Nasdaq Composite -1.2% YTD

Russell 2000 -0.7% YTD

S&P 500  +1.9% YTD

Dow Jones +2.9% YTD