Day Traders Diary

6/9/16

After securing three gains in a row, the major averages trade in negative territory at midday. The S&P 500 is lower by 0.4% while the Nasdaq Composite (-0.5%) underperforms.

The stock market has faced selling pressure since the start as participants respond to yet another batch of budding global growth concerns. Overnight, the Bank of Korea unexpectedly lowered its key interest rate to 1.25% while China's inflation data showed that CPI declined 0.5% in May against expectations for a 0.2% downtick. South Korea's KOSPI slipped 0.1% while China's Shanghai Composite and Hong Kong's Hang Seng were closed for public holidays.

A swoon in commodity prices has underscored the growth jitters as copper slides 1.3% to levels not seen since early February ($2.035/lb). Meanwhile, crude oil has dropped 1.6% to $50.39/bbl after breaking out to a fresh 2016 closing high yesterday.

Accordingly, the energy sector (-0.4%) has faced selling pressure since the start while other cyclical sectors like financials (-1.0%), consumer discretionary (-0.5%), materials (-0.9%), and industrials (-0.4%) have also had a difficult time keeping up with the market. This leaves three countercyclical sectors—consumer staples (+0.1%), utilities (+0.5%), and telecom services (+0.2%)—in positive territory.

The utilities sector has boosted its 2016 advance to 15.8% while the consumer staples space has received support from J.M. Smucker (SJM 142.66, +9.95), which has surged 7.5% thanks to better than expected earnings and upbeat guidance. On the discretionary side, Restoration Hardware (RH 28.56, -7.51) has plunged 20.8% to a fresh post-IPO low after missing earnings estimates and serving up cautious guidance.

Treasuries have extended yesterday's gains, sending the 10-yr yield lower by two basis points to 1.68%.

Economic data included Initial Claims and Wholesale Inventories:

Initial claims for the week ending June 4 were 264,000 (Briefing.com consensus 265,000), a decrease of 4,000 from the prior week

There were no special factors influencing the initial claims reading, which remained below 300,000 for the 66th straight week

The four-week moving average for initial claims dropped to 269,500 from 277,000

Continuing claims for the week ending May 28 decreased by 77,000 to 2.095 million. That is the lowest level of continuing claims since October 21, 2000, lowering the four-week moving average for this series to 2.145 million from 2.163 million

Wholesale inventories increased 0.6% in April (Briefing.com consensus +0.1%) after increasing an upwardly revised 0.2% (from 0.1%) in March

The increase in April was fueled by a 1.3% increase in nondurable inventories, which was powered by a 2.2% increase in drug inventories and a 7.5% jump in farm products inventories

Wholesale sales increased 1.0% following a downwardly revised 0.6% increase (from 0.7%) in March

The wholesale inventories to sales ratio dipped to 1.35 from 1.36, but was up from 1.31 in the same period a year ago