Day Traders Diary

5/10/16

 The stock market ended the Tuesday affair broadly higher as the S&P 500 (+1.3%; month-to-date +0.9%) erased its monthly loss. Focal points of today's trade included positive data from overseas, a rebound in oil prices, a largely range-bound session in the U.S. dollar, and the outperformance of the heavily-weighted industrial (+1.7%) and financial (+1.4%) sectors. The Dow Jones Industrial Average (+1.3%) ended ahead of the benchmark index (+1.3%) and the tech-heavy Nasdaq (+1.3%).

The stock market began its day with a broad-based rally after most global equity markets traded higher in overnight action. In Germany, the DAX gained 0.7% after Germany's Trade Balance Report for March revealed that export growth (+1.9%; consensus -0.1%) for the month beat analysts' estimates. In Asia, the yen received another reprieve from finance minister Taro Aso. The minister issued another warning of intervention in the currency market should the recent strength in the yen threaten Japan's economy.

The major averages extended their opening gains in lockstep with oil. The energy component climbed throughout the session as it rebounded from yesterday's 2.6% decline. WTI crude ended its day higher by 2.9% at $44.70/bbl. Oil still remains lower by 4.4% since last month's settlement at $46.76/bbl. Supply disruptions in Canada and Nigeria have been widely credited for the increased buying interest.

Equities extended their rally through the afternoon as the six cyclical sectors outperformed. On that note, commodity-sensitive energy (+1.8%) and materials (+1.7%) led industrials (+1.7%), financials (+1.4%), consumer discretionary (+1.3%), and technology (+1.3%) followed.

In the industrial space (+1.7%), farm equipment names and aerospace companies outperformed. Caterpillar (CAT 72.51, +1.73) and Deere (DE 83.81, +3.23) gained a respective 2.4% and 4.0% after the World Agricultural Supply and Demand Estimates Report elicited a bullish response in agriculture names. Meanwhile, rail companies outperformed in the Dow Jones Transportation Average (+1.2%) as CSX (CSX 26.37, +0.52) and Norfolk Southern (NSC 90.31, +2.03) gained 2.0% and 2.3%, respectively.

The financial sector (+1.4%) traded higher in sympathy with European banking names after Credit Suisse (CS 13.90, +0.56) reported better than feared quarterly results. Elsewhere, investment brokerages outperformed as Goldman Sachs (GS 161.42, +3.91) and Charles Schwab (SCHW 28.01 +0.74) jumped 2.5% and 2.7%, respectively. Elsewhere, Leucadia National (LUK 17.71, +0.99) gained 5.9% after it agreed to buy ITG Investment Research from Investment Technology (ITG 18.89, +0.30) for $12 million in cash. Investment Technology does not expect to book a material loss or gain from the deal.

In the consumer discretionary space (+1.3%), Amazon (AMZN 703.24, +23.494) hit a new 52-week intraday high (704.55) after ChannelAdvisor disclosed positive April same stores sales for the company. Separately, Amazon received a price target increase to $1000 from $770 at Deutsche Bank. Elsewhere, Walt Disney (DIS 106.60, +1.26) gained 1.2% ahead of this evening's quarterly report.

The heavyweight technology sector (+1.3%) ended ahead of the broader market as large caps Alphabet (GOOG 723.18, +10.28) and Microsoft (MSFT 51.02, +0.95) outperformed. Meanwhile, Apple (AAPL 93.39, +0.60) ended behind the broader sector as a report from Nikkei weighed. The article received a bearish response as it cited increased competition in the Chinese smartphone market.

The U.S. Dollar Index (94.24, +0.10) finished flat with the greenback gaining against the euro and the yen, but falling against the commodity-sensitive Canadian dollar. The euro/dollar pair finished lower by 0.1% at 1.1370 while the dollar gained 0.9% against the yen (109.28). The dollar/Canadian dollar pair ended lower by 0.4% (1.2914) as it benefited from an uptick in oil.

The Treasury complex ended flat with the yield on the 10-yr note unchanged at 1.75%.

Today's participation was below the recent average as fewer than 831 million shares changed hands on the NYSE floor.

Today's economic data included the March Job Openings and Labor Turnover Survey and Wholesale Inventories for March:

Wholesale inventories increased 0.1% in March (Briefing.com consensus +0.2%) after declining a downwardly revised 0.6% (from -0.5%) in February.

This was the first time in six months that there was an increase in wholesale inventories.

The modest uptick was fueled by a 0.5% increase in nondurable inventories, which was powered by a 2.0% increase in drug inventories and a 3.3% jump in petroleum inventories.

Durable inventories were down 0.1%. That decline was led by a 2.0% drop in metals inventories and a 1.6% drop in electrical inventories. A 1.0% jump in automotive inventories acted as a major offset.

Wholesale sales increased 0.7% following an unrevised 0.2% decline in February.

The wholesale inventories to sales ratio held steady at 1.36, but was up from 1.32 in the same period a year ago.

On a year-over-year basis, wholesale sales are down 2.0% while wholesale inventories are up 0.3%.

The March Job Openings and Labor Turnover Survey showed that job openings decreased to 5.757 million from a revised 5.608 million (revised from 5.445 million) in February.

Tomorrow's economic data will be limited to the 14:00 ET release of the April Treasury Budget.

Nasdaq Composite -3.9% YTD

Russell 2000 -0.6% YTD

S&P 500 +2.0% YTD

Dow Jones +2.9% YTD