Day Traders Diary

7/7/16

The S&P 500 (-0.3%) trades on a flat note at midday, slipping below the psychological 2100 price level. Today's action has taken on a cautious tone as investors look ahead to tomorrow's release of the Employment Situation Report for June. Additional factors contributing to today's trade have included a reversal in oil, strengthening in the dollar, and the underperformance of the financial (-0.4%) and health care (-0.5%) sectors. At midday, the Nasdaq Composite (UNCH) trades ahead of the S&P 500 (-0.3%) and the Dow Jones Industrial Average (-0.3%).

Equity futures meandered near their flat lines overnight as investors eyed a rebound in European bourses. The rebound in overseas markets followed the release of dovish minutes from the Fed's June policy meeting. The minutes indicated that the central bank will likely remain on hold, pending further economic data. The central bank also hinted that it would need to monitor conditions overseas if the United Kingdom voted to leave the European Union. Elsewhere, the weekly API Inventory Report provided for early gains in oil futures.

The major averages began on a modestly higher note, buoyed by positive employment readings and an uptick in oil. However, equities slipped through the morning with the heaviest selling following the release of the Department of Energy's weekly inventory report. The report fell largely in-line with expectations, but failed to measure up to the API inventory data. The EIA reported that crude oil inventories declined by 2.22 million barrels (consensus: between -2.3 million and -2.6 million barrels) while the API data showed that crude oil inventories fell by 6.73 million barrels (last: -3.86 million barrels). Currently, WTI crude trades lower by 4.7% ($45.21, -$2.22).

The benchmark index continues to tread water near its flat line as eight sectors trade in the red. In front of the pack, materials (+0.4%) and industrials (+0.1%) lead while countercyclical utilities (-1.5%) and telecom services (-1.5%) round out the leaderboard.

The heavily-weighted health care space (-0.6%) demonstrates relative weakness, pulling back from a weekly gain of 1.1%. Biotechnology trades ahead of the broader sector, evidenced by a flat performance from the iShares Nasdaq Biotechnology ETF (IBB 264.95, -1.29). In the ETF, Alexion Pharmaceuticals (ALXN 122.46) has gained 1.1% after the FDA granted the company's Crigler-Najjar medication orphan drug status. The broader sector leads the remaining groups on a weekly basis, having climbed 0.5%.

The high-beta chipmakers outperform in the technology space (-0.1%) as the PHLX Semiconductor Index rebounds 1.0%. In the index, Micron (MU 12.22, +0.49) outperforms, rallying 4.1%. In the broader sector, Western Digital (WDC 47.55, +2.09) leads after raising its outlook for the June quarter. The company raised its earnings and revenue estimates after yesterday's close. Separately, large cap Apple (AAPL 95.96, +0.43) displays relative strength.

The consumer staples sector (UNCH) outperforms among countercyclical groups after Danone (DANOY 14.29, +0.14) announced the acquisition of WhiteWave Foods (WWAV 56.26, +8.83) for $56.25 per share. Elsewhere, PepsiCo (PEP 107.85, +1.92) has gained 1.8% after beating bottom-line estimates for the quarter and raising its earnings guidance.

The U.S. Dollar Index (96.28, +0.23) trades near its session high as the pound and euro lose ground to the buck. Sterling has lost 0.3% against the dollar (1.2891) after slipping from the 1.3050 price level overnight. The single currency has lost 0.4% against the greenback (1.1058) while the dollar/yen pair trades lower by 0.7% (100.60).

The Treasury complex has climbed off its session low, but the yield on the 10-yr note remains higher by one basis points at 1.38%. The 10-yr yield rose to 1.42% at the beginning of the session.

Today's economic data included June Challenger Job Cuts, ADP Employment Change Report for June, and weekly initial claims:

June Challenger Job Cuts registered at 38,500, which compares to the prior month's reading of 30,200.

The ADP Employment Change report for June pointed to the addition of 172,000 jobs

The more influential Employment Situation Report (Briefing.com consensus 175K) will be released tomorrow at 8:30 ET.

Weekly initial claims for the week ending July 2 totaled 254,000 while the Briefing.com consensus expected a reading of 268,000.

With today's report, the series has been running below 300,000 for 70 consecutive weeks.

This is the longest sub-300,000 streak since 1973.

The latest initial claims reading lowered the four-week moving average for claims to 264,750.

Continuing claims for the week ending June 25 declined by 44,000 to 2.124 million.

The four-week moving average for this series increased by 3,000 to 2.148 million.