Day Traders Diary

5/3/16

 The major averages ended the Tuesday affair under pressure as the Nasdaq Composite (-1.1%) and the S&P 500 (-0.9%) erased yesterday's modest gains. Today's trade centered on a downtick in oil, concerns over global growth, continued swings in the currency market, and weakness in the financial (-1.3%) sector.

The major averages began the day on a wobbly note as renewed selling pressure from the oil pit and below-consensus economic data from overseas forced macroeconomic concerns back into focus. On that note, disappointing manufacturing PMI readings from China (49.4 in April from 49.7 in March) and the U.K. (49.2 in April from 50.7 in March) both showed larger than expected contractions in April.

The European Commission underscored the unsettling developments when it cut its 2016 euro area GDP (to 1.6% from 1.7%) and inflation forecasts (to 0.2%; from 0.5%). As a result, investors assumed a risk-off posture during the European session and bid safe haven Treasuries, gold, and the yen higher. On the home front, risk-off trade would bring the benchmark index to a session low by the late morning.

The stock market ticked off its low after midday, as all ten sectors trimmed their losses. The benchmark index would end off its low despite all ten sectors ending in the red. Rounding out the board, commodity-sensitive energy (-2.2%) and materials (-1.7%) trailed financials (-1.3%), telecom services (-1.0%) and consumer discretionary (-0.9%).

The energy space (-2.2%) trimmed its year-to-date gain to 9.6% as it surrendered to pressure in oil. WTI crude ended its day lower by 2.5% ($43.64/bbl) as investors ruminated over supply increases from OPEC states and looked forward to the API's latest inventory report. The API will release its latest stockpile data at 16:35 ET. In the broader sector, Halliburton (HAL 40.44, -1.61) declined by 3.8% after beating bottom-line estimates for the quarter. To be fair though, the company recorded asset impairments and severance costs of approximately $2.1 billion.

In the financial sector (-1.3%), money center banks displayed relative weakness as they traded lower in sympathy with a downturn in European banks. Furthermore, banks likely underperformed due to their exposure to oil and gas loans. On that note, JPMorgan Chase (JPM 62.56, -1.23) and Citigroup (C 45.57, -1.11) declined 1.9% and 2.4%, respectively. Elsewhere, MetLife (MET 44.79, -1.05) fell 2.3% after receiving a $25 million fine from the Financial Industry Regulatory Authority for omissions and negligent misrepresentations regarding its variable annuity replacements.

The industrial sector (-0.8%) displayed broad-based weakness. United Technologies (UTX 102.13, -2.24) fell 2.2% after receiving a downgrade to "Sector Perform" from "Outperform" at RBC Capital Markets. Meanwhile, the Dow Jones Transportation Average (-1.2%) displayed relative weakness as Expeditors International (EXPD 47.39, -2.87) slid 5.7% after missing top- and bottom-line estimates for the quarter.

In the heavyweight technology sector (-0.8%), Apple (AAPL 95.18, +1.54) outperformed as it rebounded from an eight-day losing streak. Elsewhere, Fidelity National (FIS 71.29, +4.11) gained 6.1% after reporting a bottom-line beat on light revenue for the first quarter. Conversely, the high-beta chipmakers underperformed, evidenced by the 1.2% decline in the PHLX Semiconductor Index.

The U.S. Dollar Index (92.95, +0.32) ended on its high as the greenback gained against the Canadian dollar and trimmed losses against the yen and euro. The dollar/yen pair ended flat at 106.45 after falling as low as 105.55 overnight. Meanwhile, the euro lost 0.2% against the dollar (1.1508) while the dollar/Canadian dollar pair finished higher by 1.5% (1.2717).

The Treasury complex settled near its session high as the yield on the 10-yr note fell seven basis points to 1.80%.

Today's participation was above the recent average as more than 975 million shares changed hands at the NYSE floor.

Today's economic data was limited to April Auto and Truck Sales.

Tomorrow's economic data will include the weekly MBA Mortgage Index and the April ADP Employment Change (Briefing.com consensus 196k), which will be released at 7:00 ET and 8:15 ET, respectively. Meanwhile, preliminary Q1 Productivity (Briefing.com consensus -1.4%), Unit Labor Cost (Briefing.com consensus 2.6%), and the March Trade Balance (Briefing.com consensus -$41.4 Billion) will all be released at 8:30 ET. Finally, the day's data will be capped off with March Factory Orders (Briefing.com consensus 0.5%) and April ISM Services (Briefing.com consensus 54.5) both crossing the wires at 10:00 ET.

Dow Jones +1.9% YTD

S&P 500 +1.0 YTD

Russell 2000 -1.2% YTD

Nasdaq Composite -4.9% YTD