Day Traders Diary

5/24/16

 [BRIEFING.COM] The S&P 500 (+1.4%) ended the Tuesday session above its 50-day simple moving average (2062) as stocks rallied in the wake of a positive reading of April New Home Sales (619,000; Briefing.com consensus 521,000). Other contributing factors for today's gain included support from the oil pit and the outperformance of the heavyweight technology (+2.1%), financial (+1.6%), and health care (+1.5%) spaces. The tech-heavy Nasdaq (+2.0%) finished ahead of both the S&P 500 (+1.4%) and the Dow Jones Industrial Average (+1.2%).

The major averages gapped up to begin the day as a positive bias in European markets helped boost U.S. equities at the open. Separately, the broader market found support from a reversal in oil as the energy component erased a 0.9% ($46.64/bbl) loss, ending the pit session higher by 1.1% ($48.65/bbl).

Equity indices climbed through the morning as positive quarterly results from Toll Brothers (TOL 29.46, +2.36) and an above-consensus reading of April New Home Sales helped extend the rally in the broader market. The positive housing reading can be added to the myriad of recent reports, which could lend themselves supportive to the Fed's argument to continue hiking interest rates. On that note, the fed funds futures market calculates the probability of an interest rate hike at the June meeting at 34.0%, compared to yesterday's 30.0% likelihood.

The benchmark index climbed to a fresh high in the final hour, ending above resistance at the 2073/2074 price level. All ten sectors finished in the green with heavily-weighted technology (+2.1%), financials (+1.5%), health care (+1.5%) and consumer discretionary (+1.3%) leading the advance.

The high-beta chipmakers outperformed in the technology space (+2.1%), evidenced by the 2.4% gain in the PHLX Semiconductor Index. In the index, Xilinx (XLNX 47.45, +2.56) gained 5.7% as investors speculated that the name is an M&A target for Qualcomm (QCOM 55.59, +1.41). Elsewhere, Microsoft (MSFT 51.59, +1.56) jumped 3.1% after receiving an upgrade to "Outperform" at Cowen. The tech giant also received a positive mention in Barron's during the afternoon.

In the financial sector (+1.5%), asset management names and investment brokerages outperformed. Charles Schwab (SCHW 30.22, +0.94) ended the day higher by 3.2% while Affiliated Managers (AMG 170.66, +5.77) gained 3.5%. Conversely, rate sensitive real estate investment trusts ended behind the broader sector.

Biotechnology demonstrated relative strength in the health care space (+1.5%). The iShares Nasdaq Biotechnology ETF (IBB 272.04, +6.01) gained 2.3% today, erasing its May loss. On the flipside, Anthem (ANTM 128.48, -4.70) lost 3.5% after being downgraded to "Neutral" from "Buy" at Sterne Agee CRT. CIGNA (CI 124.81, -1.34) fell 1.1% on headwinds to the company's proposed merger with Anthem. For the month, Anthem and CIGNA have lost 8.7% and 9.9%, respectively.

In the consumer discretionary space (+1.3%), Netflix (NFLX 97.89, +3.00) gained 3.2% after Stifel provided bullish commentary on the name. The firm cited a new timeline for film releases and the company's output deal with Disney (DIS 99.51, +0.33).

The U.S. Dollar Index (95.60, +0.37) finished higher with the greenback gaining ground against the euro and the yen. The euro/dollar pair ended lower by 0.7% (1.1143) while the dollar gained 0.7% against the yen (109.98).

Treasuries retreated today as the yield on the 10-yr note rose three basis points to 1.86%.

Today's participation was below the recent average as fewer than 867 million shares changed hands on the NYSE floor.

Today's economic data was limited to the April New Home Sales Report:

New home sales surpassed estimates in April, running at a seasonally adjusted annual rate of 619,000 (Briefing.com consensus 521,000).

That represented a 16.6% increase from March, which saw an upward revision to 531,000 from a previously reported 511,000.

Not only did the April reading come in well ahead of expectations, but the upward revision to the March figure vaulted that reading past last month's Briefing.com consensus estimate, which stood at 521,000.

New home sales in April were up 22.8% versus the same month a year ago and today's report pointed to the best month of new home sales since January 2008.

Thanks to the pick-up in activity, the April rate was above the prior 3-month average of 531,667.

Median sales price increased 9.7% year-over-year to $321,100.

At the current sales pace, the inventory of unsold new homes stands at a 4.7 months' supply, which is down from 5.8-months' supply in March and below the 6.0-months' supply that is typically associated with normal periods of buying selling.

Tomorrow's economic data will include the 7:00 ET release of the weekly MBA Mortgage Index. The day's data will be capped off with the advance reading of the April International Trade in Goods and the March FHFA Housing Price Index, which will cross the wires at 8:30 ET and 9:00 ET, respectively.

Nasdaq Composite -2.9% YTD

Russell 2000 -0.1% YTD

S&P 500 +1.6% YTD

Dow Jones +1.6% YTD