Day Traders Diary

5/5/16

The stock market trades on a flat note at midday as the S&P 500 (+0.2%) trims its weekly decline to 0.5%. Today's trade has featured a rally in crude oil, an uptick in the dollar, and leadership from the heavyweight health care (+0.5%) and technology (+0.2%) sectors. The Dow Jones Industrial Average (+0.2%) trades in-line with the benchmark index (+0.2%) and ahead of the tech-heavy Nasdaq (+0.1%).

Equities jumped out of the gate as a rally in crude oil helped spur the broader market. The energy component gained in overseas trade as stories pointing to a potential short-term supply shortage made the rounds. Specifically, concerns emerged that a wildfire in the Canadian oil sands town of Fort McMurray may impact production levels. The entire town has been evacuated as the area continues to deal with wildfires that erupted on Sunday. Furthermore, continued unrest in Libya also contributed to supply shortage speculation.

The major averages and oil trimmed their gains as participants eyed a strengthening dollar and adopted a wait-and-see stance ahead of key economic data. The U.S. Dollar Index (93.70, +0.52) gained as the greenback extended its lead over the yen and euro. On the economic front, investors are looking ahead to tomorrow's Employment Situation Report for April. The Briefing.com consensus expects that nonfarm payrolls have increased by 207,000, but yesterday's disappointing ADP Employment Change (156,000; Briefing.com consensus 196,000) likely tempered expectations for the report.

At midday, five sectors trade above their flat lines as energy (+0.7%), health care (+0.5%), technology (+0.2%), industrials (+0.2%), and consumer staples (+0.1%) lead. Conversely, telecom services (-0.3%), utilities (-0.2%), and consumer discretionary (-0.2%) sport the largest losses.

In the energy space (+0.7%), independent oil and gas companies display relative strength. Occidental Petroleum (OXY 75.58, +1.62) has gained 2.2% despite missing analysts' estimates for the first quarter. However, the company did announce that it would increase production 4.0% to 6.0% on a static $3.0 billion capital budget. Elsewhere, EOG Resources (EOG 81.06, +1.72) has gained 2.2% ahead of this evening's earnings report. Currently, WTI crude trades higher by 2.1% at $44.69/bbl.

Biotechnology outperforms in the health care space (+0.5%). The sub-group is trading higher with Regeneron Pharmaceuticals (REGN 377.02, +16.38), which reported above-consensus results for the quarter. The company also raised its sales guidance for its retinal drug Eylea. On the flipside, AmerisourceBergen (ABC 77.53, -6.76) has tumbled 8.0% after cutting its 2016 earnings guidance. However, the company did announce that it extended its relationship with Walgreens Boots Alliance (WBA 81.33, -0.16) through 2026.

In the technology space (+0.2%), the high-beta chipmakers demonstrate relative strength, evidenced by the 0.9% gain in the PHLX Semiconductor Index. Elsewhere, Yahoo! (YHOO 37.00, +1.00) has gained 2.8% as investors look to positive implications from its stake in Alibaba (BABA 78.96, +3.14). Meanwhile, Apple (AAPL 92.90, -0.72) continues to struggle after reporting earnings on April 26.

The consumer discretionary space (-0.2%) underperforms as investors weigh disappointing April same-store sales. The SPDR S&P Retail ETF (XRT 43.13, -0.68) has fallen 1.6% while L Brands (LB 72.37, -7.80) has plunged 9.7% after missing same store sales figures and lowering its first quarter sales guidance below analysts' estimates.

The Treasury complex has climbed off its low as the yield on the 10-yr note moves from 1.80% (+3 bps) down to 1.76% (-1 bps). This represents a seven basis point move since last Friday's settlement at 1.83%.

Today's economic data included April Challenger Job Cuts and weekly initial claims:

The Challenger Job Cuts report revealed 250,061 job cut announcements from January to April, marking the highest total for that period since 2009.

Initial claims filings for the week ending April 30 were 274,000 (Briefing.com consensus 259,000), an increase of 17,000 from the prior week's unrevised level.

Notwithstanding the jump in initial claims, they remained below 300,000 for the 61st straight week, extending their best streak since 1973. The four-week moving average for initial claims bumped up 2,000 to 258,000.

Continuing claims for the week ending April 23 decreased by 8,000 to 2.121 million.

That is the lowest level since November 4, 2000, and the four-week moving average of 2.140 million is the lowest level since November 11, 2000.