Day Traders Diary

4/25/16

The stock market ended a quiet session on a lower note as investors maintained a risk-off posture ahead of a busy week. Today's decline can be attributed to a downturn in crude oil, presumed profit-taking, and the underperformance of the heavily weighted industrial sector (-0.6%). The Dow Jones Industrial Average (-0.2%) finished in-line with the S&P 500 (-0.2%) and the Nasdaq Composite (-0.2%).

The equity market opened under selling pressure as investors set their sights on this week's Fed meeting. The FOMC will begin its two-day policy meeting tomorrow, and is largely expected to leave interest rates unchanged. However, participants will be looking for clues regarding the central bank's assessment of the economy and any possible changes to the Fed's path towards interest rate normalization. As a result, today's session saw limited interest in risk assets as investors looked to lock in gains after the broader market's recent run.

The key indices hit their lows in the late morning and briefly bounced off those levels through the early morning. The averages would trim their losses further in the final hour of trade. By the end of the session, six sectors remained in negative territory while countercyclical consumer staples (+0.7%) and telecom services (+0.3%) ended with the largest gains.

The commodity-sensitive energy (-1.1%) and materials (-0.6%) spaces rounded out the leaderboard while industrials (-0.6%), health care (-0.4%), and financials (-0.3%) followed.

The energy space (-1.1%) experienced broad-based weakness as the broader sector pulled back along with crude oil. On that note, WTI crude ended its day lower by 2.4% at $42.72/bbl. Meanwhile, Halliburton (HAL 40.04, -0.80) declined 2.0% after announcing its first-quarter revenue ahead of schedule and postponing its conference call until May 3. The company cited an April 30 deadline for its proposed merger with Baker Hughes (BHI 45.04, -1.39) as reason for its delayed call.

In the industrial space (-0.6%) transport names displayed relative weakness, evidenced by the 1.2% decline in the Dow Jones Transportation Average. American Airlines (AAL 37.00, -1.21) underperformed among major airlines as investors continued to focus on below-consensus second quarter unit revenue figures and competition among value airlines. Separately, Union Pacific (UNP 87.61, -2.02) declined by 2.3% as the name pulled back from its recent post-earnings gain. The stock has gained 4.5% since reporting on April 21.

Generic drug names displayed relative weakness in the health care space (-0.4%). The sub-group traded lower in sympathy with Perrigo (PRGO 99.40, -21.95), which lowered its first quarter and full-year earnings estimates below consensus. Furthermore, Perrigo also moved lower after reports indicated that CEO Joseph Papa was departing the company to head up Valeant Pharmaceuticals (VRX 35.16, -0.82).

In the consumer discretionary space (+0.2%), media names outperformed after the Justice Department and the FCC approved Charter Communication's (CHTR 207.01, +9.10) proposed acquisition of Time Warner Cable (TWC 209.63, +8.18).

The U.S. Dollar Index (94.83, -0.29) ended off its session low as the yen and the euro gained against the greenback. The dollar/yen pair finished at 111.22 (-0.5%) while the euro gained 0.3% against the dollar (1.1261).

The Treasury complex finished its day moderately lower as the yield on the 10-yr note rose to 1.90% (+1 bps).

Today's participation fell in-line with the recent average as more than 861 million shares changed hands on the NYSE floor.

Today's economic data was limited to March New Home Sales:

New home sales in March ran at a seasonally adjusted annual rate of 511,000 (Briefing.com consensus 521,000).

That was down 1.5% from February, which saw an upward revision to 519,000 from a previously reported 512,000

Taking into account the February revision, the March result was pretty much in-line with economists' expectations, so the headline disappointment isn't as big as it might appear at first blush.

Moreover, new home sales in March were up 5.4% versus the same period a year ago.

The latter point notwithstanding, sales activity moderated in March, evidenced by a sales pace that was below the prior 3-month average of 526,000.

Interestingly, the moderation in sales occurred with a 1.8% year-over-year decline in the median sales price to $288,000.

At the current sales pace, the inventory of unsold new homes stands at a 5.8 months' supply, which is closing in on the 6.0-months' supply that is typically associated with normal periods of buying and selling.

In March 2015, there was a 5.1 months' supply of unsold homes.

Tomorrow's economic data will include Durable Goods Orders for March (Briefing consensus +1.7%) and February Case-Schiller 20-city Index (Briefing.com consensus +5.6%), which will be released at 8:30 ET and 9:00 ET, respectively. Finally, April Consumer Confidence (Briefing.com consensus 96.7) will cross the wires at 10:00 ET.

Dow Jones +3.2% YTD

S&P 500 +2.2% YTD

Russell 2000 +0.1% YTD

Nasdaq Composite -2.2% YTD