Day Traders Diary


  The stock market ended the Tuesday affair on a lower note as investors favored risk-off trade ahead of key central bank decisions and next week's "Brexit" referendum. Additional factors contributing towards today's decline included strengthening in the dollar, a leg lower in oil, the violation of technical support at the S&P 500's (-0.2%) 50-day simple moving average (2076), and weakness in the heavily-weighted financial (-1.5%) and consumer discretionary (-0.3%) sectors. The Dow Jones Industrial Average (-0.3%) finished behind the benchmark index (-0.2%) and behind the Nasdaq Composite (-0.1%).

U.S. equity indices opened on a choppy note as investors weighed on-going developments in "Brexit" polling. Overnight, European indices trended lower as polling showed building momentum around the U.K.'s "Leave" camp. In response, risk assets continued to fall out of favor in Europe while sovereign bonds saw increased demand. On that note, the yield on the 10-yr Bund fell into negative territory, marking an all-time low (-0.034%).

The benchmark index surrendered a modest early gain before breaching technical support at its 50-day simple moving average (2076). The major averages slipped through the morning as pressure from the oil pit and the heavyweight financial (-1.5%) and consumer discretionary (-0.3%) groups weighed on the broader market. The S&P 500 (-0.2%) notched a new session low in the final hour of trade (2064.04) before settling below its 50-day simple moving average.

Four sectors ended beneath their flat lines as financials (-1.5%), materials (-0.8%), and consumer discretionary (-0.3%) rounded out the leaderboard. Conversely, telecom services (+0.5%), utilities (+0.5%), and consumer staples (+0.3%) ended with the largest gains.

In the economically-sensitive financial sector (-1.5%), money center banks underperformed as the group responded to a downturn in European banks. Credit Suisse (CS 11.80, -0.29) and Deutsche Bank (DB 14.73, -0.45) ended lower by 2.4% and 3.0%, respectively. It is worth noting that Deutsche Bank notched a fresh all-time low during today's session (14.59). Meanwhile, credit service names underperformed after Synchrony Financial (SYF 26.45, -3.99) raised its net charge-off estimates for the year. The stock fell 13.1% following the news. Dow component American Express (AXP 61.07, -2.60) rounded out the price-weighted index as it traded lower in sympathy with Synchrony.

Home Depot (HD 125.24, -2.59) and Lowe's (LOW 76.08, -1.42) also struggled today after the Retail Sales Report for May (+0.5%; consensus +0.4%) revealed that building materials, garden equipment, and supplies dealers saw sales decline 1.8% on a month-over-month basis. Nevertheless, the SPDR S&P Retail ETF (XRT 41.08, -0.12) ended its day in-line with the broader consumer discretionary sector (-0.3%).

The countercyclical sectors outperformed today with telecom services (+0.5%), utilities (+0.5%) and consumer staples (+0.3%) each seeing a modest bid from safe haven inflows. On that note, the three groups top the monthly leaderboard, gaining between 1.9% and 3.2%. This compares to a loss of 1.0% in the benchmark index over that time. Elsewhere, the CBOE Volatility Index (VIX 20.54, -0.43) ended lower by 2.1% while gold ended its pit session higher by 0.1% ($1,288.40/ozt; +$1.50).

The U.S. Dollar Index (94.94, +0.57) finished off its best level of the day, but the greenback ended with sizable gains against the euro and the pound. The euro/dollar pair ended lower by 0.8% (1.1206) while the pound lost 1.1% against the dollar (1.4108). Persistent strength in the dollar pressured dollar-denominated commodities as oil ended its day lower by 0.8% ($48.49/bbl; -$0.39).

The Treasury complex ended lower with the yield on the 10-yr note rising one basis point to 1.62%.

Today's participation was above the recent average as more than 881 million shares changed hands on the NYSE floor.

Today's economic data included Import and Export Prices for May, May Retail Sales, and Business Inventories for April:

Import prices increased 1.4% in May due primarily to higher fuel prices. Excluding fuel, they were up 0.3%.

May marked the second straight month of increases for nonfuel import prices, which are still down 1.7% year-over-year.

Export prices were up 1.1% in May. Excluding agriculture, they advanced 1.0%.

It was the third straight month of increases for nonagricultural export prices, which are down 4.4% year-over-year.

These price trends are starting to move in the Fed's preferred direction, yet they won't change anything with respect to this week's meeting, which is widely expected to result in a decision to leave the target range for the fed funds rate unchanged.

Retail sales increased 0.5% in May ( consensus +0.3%) while retail sales excluding autos increased 0.4% ( consensus +0.4%).

Notably, there were no revisions to the prior month, which saw the strongest monthly sales gain since Mach 2015.

Core retail sales, which exclude auto, gasoline station, building equipment, and food services sales, were up 0.4% after a 1.0% increase in April.

That is a favorable development for second quarter GDP since these sales factor into the computation of the goods component for personal consumption expenditures.

The main pockets of weakness in May were sales at building material, garden equipment and supplies dealers (-1.8%), miscellaneous store retailers (-1.2%), and department stores (-0.9%).

Conversely, the strongest increases were logged by gasoline stations (+2.1%), nonstore retailers (+1.3%), and sporting goods, hobby, book and music stores (+1.3%).

Total business inventories increased 0.1% in April ( consensus +0.2%) after a downwardly revised 0.3% increase (from +0.4%) in March.

Manufacturers' inventories (-0.1%) and wholesaler inventories (+0.6%) were already known. Retailer inventories were the only unknown and they declined 0.1% on the heels of a 0.9% increase in March.

The biggest drivers of the decline in retailer inventories were general merchandise store (-0.5%) and furniture, home furnishings, electronics and appliance store (-0.5%) inventories.

Motor vehicle dealer inventories rose 0.1% while food and beverage stores and clothing and clothing accessories stores inventories increased 0.3% and 0.2%, respectively.

The total business inventory-to-sales ratio was 1.40 in April versus 1.41 in March. In the April period a year ago, it was 1.37.

Tomorrow's economic calendar includes the 7:00 ET release of the weekly MBA Mortgage Index. Meanwhile, May Core PPI ( consensus +0.1%) and Empire Manufacturing for June ( consensus -1.6) will cross the wires at 8:30 ET. At 9:15 ET, Industrial Production ( consensus -0.1%) and Capacity Utilization ( consensus 75.2%) will each be released. Finally, the day's data will be capped off with the June FOMC Rate Decision  and April Net Long-Term TIC Flows, which will be reported at 14:00 ET and 16:00 ET, respectively.


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