Day Traders Diary

6/23/16

The stock market trades on a broadly higher note at midday, gaining traction as European indices extend their winning streak to a fifth straight session. The broad-based rally in Europe occurred as polls in Britain opened for the country's referendum on membership in the European Union. Other contributing factors for today's gain have included the outperformance of the heavily-weighted financial (+1.7%), technology, (+1.0%), and industrial (+0.9%) sectors. At midday, the Nasdaq Composite (+1.2%) trades ahead of the S&P 500 (+0.9%) and the Dow Jones Industrial Average (+0.9%).

Today's session began on a higher note as U.S. equity futures traded higher lockstep with European bourses. Equity indices in the region displayed a bullish bias as investors responded to the final round of preliminary Brexit polls. The polling data indicated that the "Remain" camp leads the "Leave" faction. As a result, risk assets received a bid with a rally in the pound leading the move. Cable notched a new six-month high overnight, climbing to the 1.4950 price level.

The S&P 500 (+0.9%) climbed above the 2100 price level in the opening gap higher, extending its advance as investors discounted the likelihood of a potential Brexit. Additionally, sector leadership from the heavily-weighted financial (+1.7%), technology, (+1.0%), and industrial (+0.9%) sectors has helped buttress the move higher. At midday, the benchmark index trades three points off its session high (2107.76) with nine sectors trading in the green. For its part, WTI crude trades higher by 0.8% ($49.53/bbl; +$0.40).

The economically-sensitive financial sector (+1.7%) demonstrates broad-based strength as the space rallies alongside European banking names. On that note, Credit Suisse (CS 13.69, +0.57) and Deutsche Bank (DB 17.74, +0.87) have jumped 4.4% and 5.1%, respectively. In the sector, Dow component Goldman Sachs (GS 152.02, +3.88) leads the price-weighted index. Furthermore, Citigroup (C 44.30, +1.62) leads the money center banks ahead of this evening's results from the latest round of stress tests. The Fed will release its Comprehensive Capital Analysis and Review (CCAR) results on June 29.

In the technology sector (+1.0%), the high-beta chipmakers demonstrate relative strength, evidenced by the 2.0% gain in the PHLX Semiconductor Index. In the group, Micron (MU 13.84, +1.12) has rallied 8.8% after receiving an upgrade to "Buy" at Nomura. In the broader sector, data storage names outperform with Western Digital (WDC 50.87, +2.52) gaining 5.2%. Conversely, Red Hat (RHT 77.82, -1.93) has declined 2.4% after disappointing participants with its mixed outlook. On the IPO front, Twilio (TWLO 25.55, +10.55) has spiked 70.4% after pricing its IPO at $15 overnight.

The industrial sector (+0.9%) outperforms as Dow components Boeing (BA 132.79, +1.00) and Caterpillar (CAT 77.78, +1.35) gain 0.9% and 1.8%, respectively. Boeing leads after receiving an "Overweight" designation and a price target of $153 at Morgan Stanley. On the flipside, the Dow Jones Transportation Average (+0.8%) underperforms the sector and broader market.

The U.S. Dollar Index (93.45, -0.26) floats below its best level of the day as the pound and commodity currencies gain against the buck. The dollar/Canadian dollar pair trades lower by 0.5% (1.2784) after ticking off the 1.2680 price level overnight. Separately, sterling has gained 0.7% against the buck (1.4813).

The Treasury complex trades off its low, but the yield on the 10-yr note remains higher by four basis points at 1.73%.

Today's economic data included weekly initial claims, New Home Sales for May, and Leading Indicators for May:

Initial claims for the week ending June 18 fell by 18,000 from the prior week to 259,000 (Briefing.com consensus 273,000)

The four-week moving average dipped by 2,250 to 267,000.

There were no special factors influencing the initial claims reading, which held below 300,000 for the 68th straight week.

Continuing claims for the week ending June 11 decreased by 20,000 to 2.142 million.

With that reading, the four-week moving average for continuing claims decreased by 4,500 to 2.147 million.

New home sales declined 6.0% month-over-month in May to a seasonally adjusted annual rate of 551,000 (Briefing.com consensus 560,000) from a downwardly revised 586,000 (from 619,000) in April.

Despite the monthly sales drop, new home sales in May were 8.7% above the same period a year ago.

The downturn in May featured a 33.3% decline in sales in the Northeast, although every region experienced a sales drop with the exception of the Midwest (+12.9%).

Notably, the South and the West -- the two biggest regions for new home sales -- saw sales decline 0.9% and 15.6%, respectively.

The median sales price of a new home increased 1.0% year-over-year to $290,400.

With the slower sales pace in May, the inventory of new homes for sale jumped to a 5.3-month supply from 4.9 months in April.

The Conference Board reported a 0.2% decline in its Leading Economic Index for May.

That was well below the Briefing.com consensus estimate, which called for a 0.2% increase, and it followed on the heels of two consecutive monthly gains.

In the six-month period ending May 2016, the leading economic index was flat after increasing 1.2% during the previous six months.

The Conference Board added that the weakness among the leading indicators has become somewhat more widespread than the strengths in recent months.

The decline in May was led by average weekly initial claims, which subtracted 0.23 percentage points, offsetting gains in six other components.

The strongest of those gains was the interest rate spread, which added 0.16 percentage points to the index.

The Conference Board estimated small positive contributions for manufacturers' new orders for:

Consumers goods and materials (+0.01 percentage points) and nondefense capital goods orders excluding aircraft (+0.02 percentage points).

Separately, the Coincident Index was unchanged in May while the Lagging Economic Index increased 0.3%.