Day Traders Diary

7/20/16

The stock market ended the midweek affair on a higher note as above-consensus quarterly results from Microsoft (MSFT 55.91, +2.82) facilitated a bid in the heavyweight technology sector (+1.4%). Investors maintained a decidedly risk-on approach, bidding cyclical sectors and the beleaguered biotechnology sub-group. The S&P 500 (+0.4%) and the Dow Jones Industrial Average (+0.2%) each carved out new all-time closing highs while the Nasdaq Composite (+1.1%) notched a new 2016 closing high.

Equities began the day on a modestly higher note as investors responded to a positive bias in global bourses. Germany's DAX (+1.6%) paced the advance as participants examined better-than-expected corporate earnings reports. German software company SAP (SAP 83.71, +4.39) outperformed after topping analysts' estimates for the quarter and reaffirming its outlook. The company also stated that it has yet to see any impact from last month's surprise Brexit vote. On that note, the European Central Bank is scheduled to meet Thursday, marking its first meeting since the referendum. The central bank is widely expected to leave its policy stance unchanged.

The major averages ratcheted higher after the first hour of trade, corresponding to a reversal in crude oil. WTI crude erased an early loss as investors weighed the latest inventory data from the Department of Energy. The EIA reported that crude oil inventories fell by 2.34 million barrels (estimate: -2.10 million barrels) while gasoline inventories rose by 0.91 million barrels (estimate: -0.83 million barrels). The benchmark index finished off its session high with six sectors in positive territory. In front of the pack, technology (+1.4%), health care (+0.9%), and consumer discretionary (+0.4%) led while energy (-0.2%), utilities (-0.4%), and consumer staples (-0.5%) rounded out the board.

The technology sector (+1.4%) paced today's advance as Dow component Microsoft (MSFT 55.91, +2.82) rallied 5.3%. The stock finished on top of the price-weighted index after impressing investors with its cloud service business. The high-beta chipmakers also outperformed as Marvell (MRVL 11.23, +1.38) surged 14.1% after beating bottom-line estimates. Separately, Qualcomm (QCOM 55.82, +0.68) and Intel (INTC 35.69, +0.54) gained a respective 1.2% and 1.5% ahead of this evening's quarterly reports.

In the health care space (+0.9%), biotechnology displayed relative strength, evidenced by the 2.4% gain in the iShares Nasdaq Biotechnology ETF (IBB 276.54, +6.55). In the group, Mylan Labs (MYL 47.20, +2.27) jumped 5.1% after announcing the launch of its Crestor generic in the United States. In the broader sector, Intuitive Surgical (ISRG 703.05, +31.15) rallied 4.6% after reporting above-consensus quarterly results and receiving several price target increases.

Media names underperformed in the consumer discretionary space (+0.4%) as Dow component Disney (DIS 98.22, -1.25) weighed. The stock slipped 1.3% after it was downgraded to "Hold" from "Buy" at Stifel. Elsewhere, 21st Century Fox (FOXA 27.00, -0.75) fell 2.7% amid uncertainty regarding Fox News CEO Roger Ailes. Reports indicated that 21st Century Fox is reviewing allegations of sexual assault after a lawsuit was filed against Mr. Ailes.

The U.S. Dollar Index (97.11, +0.05) finished modestly higher as it gained against the euro, commodity currencies, and the yen. The euro/dollar pair ended lower by 0.1% (1.1014) while the dollar ticked higher by 0.3% against the commodity-sensitive Canadian dollar (1.3062). Separately, the dollar jumped 0.8% against the safe-haven yen (106.93).

The Treasury complex settled off its session low, but the yield on the 10-yr note rose two basis points to 1.58%.

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

Today's economic data was limited to the weekly MBA Mortgage Index:

The weekly MBA Mortgage Index showed a seasonally adjusted decrease of 1.3% in mortgage applications after rising 7.2% in the prior week.

Tomorrow's economic data will include weekly initial claims (Briefing.com consensus 265k) and the July Philadelphia Fed Survey (Briefing.com consensus 5.0), which will both be released at 8:30 ET. Separately, the FHFA Housing Price Index for May will cross the wires at 9:00 ET. Finally, the day's data will be capped off with Existing Home Sales (Briefing.com consensus 5.50 million) for June and June Leading Indicators (Briefing.com consensus 0.3%), which will both be reported at 10:00 ET.

Dow Jones +6.7% YTD

Russell 2000 +6.5% YTD

S&P 500 +6.3% YTD

Nasdaq +1.7% YTD