Day Traders Diary

8/2/16

 The stock market ended the Tuesday affair on a lower note as the key U.S. indices moved lower lockstep with global bourses. Today's decline was facilitated by disappointment surrounding Japan's latest fiscal stimulus package and continued weakness from European banking names. Additionally, a failed rebound attempt in oil and the underperformance of heavily-weighted technology (-0.8%), industrials (-0.9%), financials (-0.9%), and consumer discretionary (-1.5%) contributed to today's loss. The Nasdaq Composite (-0.9%) settled behind the S&P 500 (-0.6%) and the Dow Jones Industrial Average (-0.5%).

U.S. equities began the day under pressure, responding to losses from Japan's Nikkei (-1.5%) and European markets. In Japan, Prime Minister Shinzo Abe's latest round of stimulus elicited a sell-the-news response as participants eyed limited direct stimulus. Separately, weak earnings results from Commerzbank kept pressure on European banks while Deutsche Bank (DB 12.58, -0.49) and Credit Suisse (CS 10.81, -0.53) lost their spots in the Euro Stoxx 50 Index (-2.0%).

The major averages pulled back through the afternoon as oil and equities yielded to selling pressure in the broader market. The energy component trimmed an early advance, falling into negative territory near midday. WTI crude finished its session lower by 1.5% ($39.49/bbl; -$0.60), extending its weekly loss to 5.0%. On a side note, investors will receive the latest stockpile data from the American Petroleum Institute this evening while the Department of Energy's more influential stockpile data will be release tomorrow at 10:30 ET.

The S&P 500 (-0.6%) finished off its worst level of the day, reclaiming technical support near the 2152/2153 price level. However, nine sectors finished in the red with technology (-0.8%), industrials (-0.9%), financials (-0.9%), and consumer discretionary (-1.5%) rounding out the leaderboard. The remaining decliners finished with losses between 0.1% (consumer staples) and 0.6% (utilities). Conversely, energy (+0.9%) ended with the only gain.

The consumer discretionary space (-1.5%) displayed broad-based weakness as Ford (F 11.94, -0.54) and General Motors (GM 29.93, -1.37) weighed among auto names. The two fell 4.4% apiece after July U.S. auto sales disappointed. Retail names also underperformed in the group, evidenced by the 2.5% decline in the SPDR S&P Retail ETF (XRT 43.80, -1.13).

Airlines underperformed in the industrial sector (-0.9%) as the U.S. Global Jets ETF (JETS 21.63, -0.92) lost 4.1%. Delta Air Lines (DAL 36.39, -3.09) pressured the ETF after reporting that passenger revenue per available seat mile declined 7.0% in July. This missed prior guidance given by the airline. Separately, Emerson (EMR 53.03, -2.75) fell 4.9% after missing top- and bottom-line estimates for the quarter and lowering its full-year guidance.

In the technology space (-0.8%), top-weighted Apple (AAPL 104.48, -1.57) was under pressure after being downgraded to "Outperform" from "Buy" at Daiwa. On a side note, the tech giant sports a gain of 8.1% since reporting earnings on July 26. Conversely, data storage names underperformed as Seagate Technology (STX 30.65, -1.78) lost 5.5%. Seagate Technology released its earnings report ahead of today's session, showing in-line results with its pre-announcement from July 11. The high-beta chipmakers underperformed in the group, evidenced by the 1.6% decline in the PHLX Semiconductor Index.

Biotechnology demonstrated relative strength in the health care sector (-0.3%) as the iShares Nasdaq Biotechnology ETF (IBB 294.69, +0.62) rose 0.2%. The group benefited from intraday reports indicating that Allergan (AGN 250.75, -4.11) and Merck (MRK 58.33, -0.33) may be interested in acquiring Biogen (BIIB 330.11, +28.28). In the broader sector, Dow component Pfizer (PFE 36.39, -0.92) rounded out the price-weighted index after reporting a slight beat.

The U.S. Dollar Index (95.08, -0.63) finished off its worst level of the day, but the euro, pound, and yen each finished with gains against the greenback. The single currency jumped 0.5% against the greenback (1.1223) while sterling rallied 1.3% against the dollar (1.3345). Separately, the dollar/yen pair finished lower by 1.5% (100.90) as investors responded to the latest fiscal stimulus plan out of Japan.

The Treasury complex ended on a mixed note, but the group finished off its worst level of the day. The yield on the 10-yr note ended higher by two basis point (1.55%) after backtracking from the 1.57% (+4 bps) level.

Participation was above the recent average as more than 916 million shares changed hands on the NYSE floor.

Today's economic data included June Personal Income/Personal Spending reports and Core PCE Prices for June:

Personal income increased 0.2% in June (Briefing.com consensus +0.3%) on the heels of a 0.2% increase for May.

The improvement was driven largely by a 0.3% increase in wages and salaries.

Personal spending was up 0.4% (Briefing.com consensus +0.3%) on top of a 0.4% increase for May.

The personal savings rate fell to 5.3% in June from 5.5% in May.

The PCE Price Index increased 0.1% and the core PCE Price Index, which excludes food and energy, also rose 0.1% (Briefing.com consensus +0.2%).

On a year over-year basis, both the PCE Price Index and Core PCE Price Index held steady versus May, up 0.9% and 1.6%, respectively.

Tomorrow's economic data will include the 7:00 ET release of the weekly MBA Mortgage Index. Separately, the ADP Employment Change Report (Briefing.com consensus 165k) and ISM Services for July (Briefing.com consensus 55.8) will cross the wires at 8:15 ET and 10:00 ET, respectively.

Russell 2000 +5.8% YTD

S&P 500 +5.5% YTD

Dow Jones +5.1% YTD

Nasdaq Composite +2.6% YTD