Day Traders Diary

6/27/16

 The stock market began its week on a lower note as investors eyed the potential implications of the United Kingdom leaving the European Union. The decision has had far reaching consequences across capital markets as investors look for clues to the potential timing and terms of the official breakup. Additional focal points impacting today's trade included strengthening in the dollar, a downturn in oil, and the underperformance of the heavyweight financial (-2.8%), technology (-2.3%), and industrial (-2.3%) spaces. The Nasdaq Composite (-2.4%) ended its day behind the S&P 500 (-1.8%) and the Dow Jones Industrial Average (-1.5%).

The major U.S. averages began under pressure as investors eyed a continued downturn in European bourses. European equity markets stumbled for the second straight session as investors maintained their risk-off posture. Specifically, British banking names led the losses as concerns mounted regarding how a Brexit may impact lenders in the region and the potential effects of an elongated period of low interest rates. Additionally, Barclays (BCS 7.03, -1.86) plunged 20.9% after numerous firms downgraded the stock post-Brexit.

The S&P 500 (-1.8%) gapped down at the beginning of the session, slipping alongside weakness in heavily-weighted financials (-2.8%), technology (-2.3%), and industrials (-2.43). The benchmark index tested technical support at the psychological 2000 price level in the opening hour and continued to trade near that level for most of the session. Equities carved out fresh intraday lows in the final hour of trade, but were able to finish the day above those levels. Eight sectors ended in negative territory with commodity-sensitive materials (-3.4%) trailing financials (-2.8%), energy (-2.5%), and technology (-2.3%). Conversely, countercyclical utilities (+1.3%) and telecom services (+0.6%) ended in the green.

The economically-sensitive financial sector (-2.8%) demonstrated broad-based weakness as it traded lower in sympathy with European banking names. In the sector, asset management companies and life insurance names showed the largest losses as Bank of New York Mellon (BK 35.88, -2.11) and MetLife (MET 36.53, -2.91) fell 5.6% and 7.4%, respectively. Elsewhere, Dow component American Express (AXP 57.67, -2.39) finished at the bottom of the price-weighted index.

The high-beta chipmakers demonstrated relative weakness, evidenced by the 4.0% decline in the PHLX Semiconductor Index. The Semiconductor Index has lost 7.3% this month, compared to a loss of 4.6% in the benchmark index over that time. In the technology space (-2.3%), large cap components Microsoft (MSFT 48.43, -1.40) and Facebook (FB 108.99, -3.08) underperformed, declining 2.8% apiece.

The energy sector (-2.5%) ended its day under pressure as investors weighed a 2.4% ($46.48/bbl; -$1.12) decline in crude oil. In the group, independent oil and gas names underperformed as the sub-group faces steeper downside risks from a prolonged downturn in crude oil. Elsewhere, Dow component Exxon Mobil (XOM 8886, -0.53) lost 0.6%.

The Dow Jones Transportation Average (-3.1%) finished behind the benchmark index as airlines underperformed. The U.S. Global Jets ETF (JETS 19.85, -0.82) lost 4.0% today, extending its monthly decline to 13.7%.

The U.S. Dollar Index (96.43, +0.98) ended higher by 1.0% as the greenback gained over commodity currencies, the euro, and the pound. The euro/dollar pair ended lower by 0.9% (1.1020) while sterling lost 3.4% (1.3209) against the buck. Separately, the dollar lost 0.1% against the safe haven yen (102.09).

The Treasury complex ended near its best level of the day as the yield on the 10-yr note slipped ten basis points to 1.46%.

Today's participation was above the recent average as more than 1.2 billion shares changed hands on the NYSE floor.

Today's economic data was limited to the International Trade in Goods Report for May:

May International Trade in Goods showed a deficit of $60.59 billion, compared to the April deficit of $57.53 billion.

Tomorrow's economic data will include the third estimate of first quarter GDP (Briefing.com consensus 1.0%) and the third estimate for the first quarter GDP deflator (Briefing.com consensus 0.6%), which will both be released at 8:30 ET. Separately, the Case-Schiller 20-city index for April (Briefing.com consensus 5.5%) and Consumer Confidence for June (Briefing.com consensus 93.1) will cross the wires at 9:00 ET and 10:00 ET, respectively.

Nasdaq -8.3% YTD

Russell 2000 -4.0% YTD

S&P 500 -2.1% YTD

Dow Jones -1.6% YTD