Day Traders Diary

6/16/16

The S&P 500 (-0.1%) trades on a lower note at midday as the benchmark index looks to extend its losing streak to six straight sessions. Today's trade has featured renewed concerns regarding the global economy, a leg lower in oil, strengthening in the dollar, and the underperformance of the heavily-weighted industrial (-0.4%), financial (-0.4%), and technology (-0.3%) sectors. The tech-heavy Nasdaq (-0.3%) trades behind the benchmark index (-0.1%) and the Dow Jones Industrial Average (+0.1%).

The stock market opened under selling pressure as global bourses resumed their recent rout. The latest round of selling followed the release of policy statements from the Fed, the Bank of Japan, and the Bank of England. Each voted to maintain their key interest rates and hold steady on their broader policy stance. However, the move failed to illicit a bullish response as participants looked to an uncertain global outlook. Furthermore, concerns regarding a potential Brexit weighed as polls remain mixed.

Equity indices fell through the opening hour as the S&P 500 violated first level technical support near 2062/2064. Additionally, the opening weakness was exacerbated by a tumble in crude oil. The energy component fell from the $47.00/bbl price level before finding its bearings near its session low ($46.17/bbl). The benchmark index found support near 2049/2050, trimming its loss through the late morning. The broader market continued to pare losses following the close of trade in Europe, accelerating its rally after British Prime Minister David Cameron said, "it is right that we are suspend campaigning activity [for the day] in this referendum" following the murder of opposition lawmaker Jo Cox. To be fair, many participants likely entered today's session with heavy short positioning, and were caught off-side, leading to the rebound in the market.

The benchmark index has since been able to reclaim support near the 2062/2064 as six sectors trade in the red. In the back of the pack, energy (-0.6%) trails industrials (-0.4%), financials (-0.4%), and technology (-0.3%). On the flipside, countercyclical telecom services (+0.6%), utilities (+0.6%), and consumer staples (+0.3%) outperform.

The financial sector (-0.4%) has trimmed its loss alongside European banks. Deutsche Bank (DB 14.70, -0.11) trades lower by 0.8% after briefly carving out a fresh all-time low ($14.13). Elsewhere, Wells Fargo (WFC 46.41, -0.38) and Bank of America (BAC 13.20, -0.14) have declined by a respective 0.8% and 1.1%. The money center bank sub-group is responding to diminished rate hike expectations.

The high-beta chipmakers demonstrate relative weakness, evidenced by the 0.8% decline in the PHLX Semiconductor Index. In the group, Jabil Circuit (JBL 18.45, +0.02) has gained 0.1% as investors weigh above-consensus quarterly results against a downward revision to fourth-quarter earnings guidance. Apple (AAPL 97.15, +0.01) has trimmed its loss with the broader market. Separately, large cap Alphabet (GOOGL 722.20, -9.99) has declined 1.4%.

The Dow Jones Transportation Average (-0.6%) underperforms as airline names continue to weigh. The U.S. Global Jets ETF (JETS 21.54, -0.22) has lost 1.0% today, extending its weekly loss to 6.7%. In the group, American Airlines (AAL 29.35, -1.14) has declined 3.8% after being downgraded to "Underperform" at Bank of America/Merrill Lynch.

The U.S. Dollar Index (94.71, +0.10) has slipped lower in recent trade as the pound and the euro pare losses against the greenback. The euro/dollar pair trades lower by 0.4% (1.1218) after bouncing off the 1.1130 price level. Separately, sterling has declined by 0.1% against the dollar (1.4200).

The Treasury complex moved off its high shortly after European markets closed for the day. Currently, the yield on the 10-yr note trades flat at 1.58%.

Today's economic data the CPI Report for May, weekly initial claims, the Philadelphia Fed Survey for June, first quarter Current Account Balance, and the June NAHB Housing Market Index:

The Consumer Price Index for May didn't generate any negative headline surprises. The all items index was up 0.2% (Briefing.com consensus +0.3%) while the index for all items less food and energy also increased 0.2%, as expected.

A 0.4% increase in the shelter index and a 0.5% jump in the medical care services index drove core CPI higher, as they helped offset a 1.3% decline in the used cars and trucks index and a 0.1% decline in the new vehicles index.

A 0.2% decline in the food index helped tamp down total CPI, which moved up for the month on the back of a 1.2% increase in the energy index. The latter was led by a 2.3% jump in the gasoline index.

On an unadjusted basis, total CPI is up 1.0% over the last 12 months, versus a 1.1% increase for the 12 months ending in April.

Core CPI is up 2.2% versus up 2.1% for the 12 months ending in April.

The uptick in core CPI might catch the Fed's eye, yet that's no sure thing knowing the Fed didn't raise rates in March when core CPI was up 2.3% year-over-year.

The initial claims report was pretty status quo. It showed claims increasing 13,000 for the week ending June 11 to 277,000 (Briefing.com consensus 269,000).

The status quo element there was that claims remained below 300,000 for the 67th straight week.

There were no special factors influencing the initial claims reading, which lowered the four-week moving average by 250 to 269,250.

Continuing claims for the week ending June 4 increased by 45,000 to 2.157 million.

The four-week moving average for this series, though, edged up by only 1,000 to 2.150 million.

The Philadelphia Fed Index jumped almost seven points to 4.7 in June (Briefing.com consensus estimate of 0.7)

In doing so, it bumped the index out of contraction mode, evidenced by negative readings in April and May.

This regional manufacturing report follows on the heels of the Empire Manufacturing Survey for June, which also saw a nice uptick (to 6.0 from -9.0) that tipped things back into an expansion mode.

For the Philadelphia Fed Index, the headline isn't quite as encouraging as it looks.

That's because the main driver was the prices paid index, which moved from 15.7 to 23.0, and the delivery times index, which improved from -14.6 to -8.3.

Notably, the new orders index worsened, slipping from -1.9 to -3.0, as did the shipments index, which dropped from -0.5 to -2.1, and the unfilled orders index, which fell from -8.8 to -12.6.

In turn, the survey's future indicators decreased for the second consecutive month, with the diffusion index for future general activity dipping from 36.1 to 29.8.

The current account deficit for the first quarter totaled $124.7 billion while the Briefing.com consensus expected the deficit to hit $125.4 billion. The fourth quarter deficit was revised to $113.4 billion from $125.3 billion.

The NAHB Housing Market Index for June came in at 60 from an unrevised 58 in May while the Briefing.com consensus expected the reading to come in at 59.0.