Day Traders Diary

5/25/16

The stock market ended the Wednesday affair on a higher note as the S&P 500 (+0.7%) extended its May gain to 1.2%. Focal points for today's trade included a positive reading of the Department of Energy's stockpile data, leadership from the heavily-weighted financial (+1.0%) and technology (+0.7%) sectors, and Greece receiving approval for its next bailout tranche. The Dow Jones Industrial Average (+0.8%) finished ahead of the S&P 500 (+0.7%) and the Nasdaq Composite (+0.7%).

Equities gapped higher to begin their day, boosted by a positive bias in overseas trade. Global bourses ended higher, responding to yesterday's rally in U.S. markets, bullish API Inventory data, and a freshly minted agreement for Greece to unlock the next bailout tranche. Additionally, there was an underlying sense that markets are becoming more comfortable with increased U.S. rate hike expectations.

The major averages traded lockstep with oil as the energy component extended its gain. However, the pair briefly paused their advance as investors ruminated over the Department of Energy's latest stockpile data. The Energy Information Administration reported that crude oil inventories declined by 4.22 million barrels, compared to the estimated 2.45 million barrel draw. Furthermore, the report also showed that gasoline inventories rose by 2.04 million barrels, compared to the estimated 1.06 million barrel draw.

The broader market extended its gain through the afternoon as commodity-sensitive energy (+1.5%) and materials (+1.2%) led heavily-weighted financials (+1.0%) and technology (+0.7%). Conversely, countercyclical utilities (-0.3%) ended with the only loss.

The energy space (+1.5%) demonstrated broad-based strength as a rally in oil continued to add support. Independent oil and gas companies, pipeline names, and oilfield servicers each outperformed. Meanwhile, oil and gas refiners displayed relative weakness as the group weighed disappointing gasoline inventories. Phillips 66 (PSX 80.13, +0.43) gained 0.5%, but still ended behind the broader sector and market. For its part, WTI crude jumped 1.9% ($49.56), ending its day at the best level of 2016.

The economically-sensitive financial sector (+1.0%) outperformed as market participants digested more hawkish commentary from FOMC members. St. Louis Fed President and FOMC voter James Bullard commented last night that labor market strength appears to support more interest rate hikes. However, President Bullard did also say that a June or July hike is not set in stone. Money center banks finished in front of the sector on the anticipation that their earnings prospects and net interest margins will improve.

In the technology space (+0.7%), Dow component IBM (IBM 151.69, +3.38) outperformed, gaining 2.3%. Elsewhere, heavyweight constituent Microsoft (MSFT 52.12, +0.53) gained 1.0% after announcing that it would cut 1,850 jobs in order to streamline its smartphone division. Elsewhere, Hewlett Packard Enterprise (HPE 17.35, +1.10) reported above-consensus results for the quarter and announced a tax-free spin-off of its Enterprise Services business with Computer Sciences (CSC 50.65, +15.00).

In the consumer discretionary space (+0.5%), retail names continued their recent rebounds, evidenced by the 1.2% gain in the SPDR S&P Retail ETF (XRT 41.70, +0.50). In the sub-group, Tiffany & Co (TIF 63.89, +0.04) gained 0.1% despite disappointing investors with its quarterly results and guidance.

The U.S. Dollar Index (95.42, -0.15) ended off its low as commodity currencies and the euro gained against the greenback. The euro/dollar pair finished higher by 0.1% (1.1152) while the dollar lost 0.8% against the commodity-sensitive Canadian dollar (1.3025).

The Treasury complex finished on a flat note with the yield on the 10-yr note unchanged at 1.87%.

Today's participation was below the recent average as fewer than 891 million shares changed hands on the NYSE floor.

Today's economic data included the weekly MBA Mortgage Index, April International Trade in Goods, and the March FHFA Housing Price Index:

The weekly MBA Mortgage Index showed a seasonally adjusted increase of 2.3%

April International Trade in Goods showed a deficit of $57.53 billion, compared to the March deficit of $56.90 billion.

The FHFA Housing Price Index for March rose 0.7%, which followed an increase of 0.4% in February

Tomorrow's economic data will include weekly initial claims (Briefing.com consensus 275k) and April Durable Good Order (Briefing.com consensus 0.6%), both crossing the wires at 8:30 ET. Finally, Pending Home Sales for April (Briefing.com consensus 0.6%) will be released at 10:00 ET.

Dow Jones +2.5% YTD

S&P 500 +2.3% YTD

Russell 2000 +0.4% YTD

Nasdaq Composite -2.3% YTD