Day Traders Diary

7/19/16

 The stock market ended the Tuesday affair on a mixed note, responding to a lukewarm batch of earnings reports and a negative bias in global bourses. Today's trade also featured a downturn in oil futures, strengthening in the dollar, and weakness from the heavily-weighted consumer discretionary (-0.2%) and health care (-0.2%) sectors. The Nasdaq Composite (-0.4%) finished behind the S&P 500 (-0.1%) and the Dow Jones Industrial Average (+0.1%).

Equity indices began the day on a lower note as global markets tilted to the downside. European indices led the losses as disappointing earnings results and a below-consensus reading of Germany's July ZEW Economic Sentiment Survey (-6.8; consensus: 9.0) weighed. Additionally, the International Monetary Fund added to the negative tone when it cut the United Kingdom's 2016 projected growth rate to 1.7% (from 1.9%). The organization also trimmed its global growth estimate for the year to 3.4% (from 3.5%).

The benchmark index gapped down at the start of the session, notching a morning low near the 2160 price level. Sellers were unable to press equities much farther as investors looked to the remainder of a busy earnings week. The major averages ticked off their lows in the final hour while eight sectors finished in the red. The materials (-0.7%), energy (-0.6%), and telecom services (-0.4%) sectors led the losses while the remaining decliners finished with losses between 0.1% (technology) and 0.2% (consumer discretionary).The heavyweight financial (+0.1%) and industrial (+0.1%) groups ended with the only gains.

The energy space (-0.5%) displayed relative weakness as the group responded to a leg lower in oil futures. August crude ended its day lower by 1.5% ($44.67/bbl; -$0.68), extending its July decline to 7.4%. In the sector, oilfield service names underperformed as Halliburton (HAL 44.99, -0.62) and Baker Hughes (BHI 45.74, -1.12) declined by 1.4% and 2.4%, respectively. Halliburton is scheduled to release its quarterly report tomorrow morning.

The countercyclical health care group (-0.2%) underperformed as health care service providers weighed. In the group, Aetna (AET 115.15, -3.21) and Humana (HUM 153.38, -6.26) lost a respective 2.7% and 3.9% after reports indicated that the government may seek to block their proposed merger. The same reports signaled that similar actions might be taken regarding the potential Anthem (ANTM 132.06, -2.94) and Cigna (CI 130.30, -2.83) deal. On the flipside, Dow component Johnson & Johnson (JNJ 125.25, +2.11) ended at the top of the price-weighted index.

In the consumer discretionary space (-0.2%), Netflix (NFLX 85.84, -12.97) tumbled 13.1% after subscriber growth for the second quarter missed analysts' estimates. The company also lowered its outlook for net subscribers in the coming quarter. Separately, restaurant names outperformed as Chipotle Mexican Grill (CMG 415.31, +6.41) and McDonald's (MCD 126.50, +2.70) gained 1.6% and 2.2%, respectively.

The technology space (-0.1%) finished its day in-line with the benchmark index as Oracle (ORCL 41.08, -0.56) and Microsoft (MSFT 53.09, -0.87) weighed on the group. Microsoft sank 1.6% ahead of this evening's quarterly report. Conversely, Yahoo! (YHOO 38.17, +0.22) gained 0.6% after it was reported that five bidders have presented final-round offers for the web portal.

The U.S. Dollar Index (97.05, +0.48) ended broadly higher as the euro and the pound each lose ground to the greenback. The single currency ticked lower by 0.5% against the dollar (1.1019) while sterling slipped 1.2% against the buck (1.3095). Separately, the dollar gained 0.7% against the commodity-sensitive Canadian dollar (1.3028).

The Treasury complex settled near its session high as the yield on the 10-yr note slipped three basis points to 1.56%.

Today's trading volume was below the recent average as fewer than 736 million shares changed hands on the NYSE floor.

Today's economic data was limited to Housing Starts and Building Permits for June:

Housing starts jumped 4.8% to a seasonally adjusted annual rate of 1.189 million units (Briefing.com consensus 1.165 million) in June on the heels of a downwardly revised 1.135 million (from 1.164 million) in May.

Building permits increased to a seasonally adjusted annual rate of 1.153 million (Briefing.com consensus 1.150 million) while the prior month saw a small downward revision to 1.136 million from 1.138 million.

By and large, then, the starts and permits data for June were largely as expected when factoring for the downward revisions to May.

The trouble there is that neither starts nor permits have exhibited any real growth in recent months.

With the latest report, the three-month moving average for starts stands at 1.160 million versus 1.167 million in February.

The three-month moving average for permits rests at 1.140 million versus 1.184 million in February.

The improvement in starts in June was fueled by a 4.4% pickup in single-family starts and a 5.4% increase in multi-unit starts.

The Northeast was the main driver of the improvement in single-family starts, logging a 31.6% increase.

Single-family starts, though, were up in all regions, including a 7.3% gain in the Midwest, a 3.1% increase in the West, and a 0.5% uptick in the South.

Permits for single-family units increased 1.0% and were up 2.5% for multi-unit dwellings.

The Northeast again led the way, with permits up 13.7% for single-family units; however, the West was the only other region to show a gain in single-family permits (+0.6%).

The Midwest was flat and the South was down 0.3%.

The number of units under construction at the end of the period was 1.015 million, up slightly from 1.013 million in May.

That left the second quarter average for units under construction at 1.008 million versus 985,000 in the first quarter.

The higher second quarter average will factor favorably in the residential investment component for second quarter GDP.

Tomorrow's economic data will be limited to the 7:00 ET release of the weekly MBA Mortgage Index