Day Traders Diary

8/3/16

 The stock market ended the midweek affair on a flat note as investors looked ahead to tomorrow's policy statement from the Bank of England and significant data due out later in the week. The S&P 500 (+0.3%) snapped a two-day losing streak, benefiting from a rebound in crude oil and key sector leadership from the heavily-weighted technology (+0.4%), industrial (+0.4%), and financial (+1.0%) sectors. The Nasdaq Composite (+0.4%) finished slightly ahead of the benchmark index (+0.3%) and the Dow Jones Industrial Average (+0.2%).

Equity indices gyrated at the start of the session as investors responded to a negative bias in global markets. Japan's Nikkei (-1.9%) underperformed for a second session as investors continued to dissect the country's latest stimulus package. Investor apprehension was related to the lack of labor market reforms and limited productivity improvements contained in the new policy measures. Separately, the U.K.'s July Services PMI (47.4; previous 52.3) sparked further growth concerns ahead of tomorrow morning's policy decision from the Bank of England. The central bank is widely expected to offer further easing after holding in July.

The major averages shook off opening weakness as investors poured over the Energy Information Administration's latest stockpile data. The Department of Energy reported that crude oil inventories rose by 1.41 million barrels (estimated: -1.36 million barrels), but that gasoline inventories fell by 3.26 million barrels (estimated: -0.20 million barrels). In response, WTI crude ticked off the $40.00/bbl price level, finishing its day higher by 3.4% ($40.82/bbl; +$1.33).

The S&P 500 (+0.3%) endured a sleepy session, maintaining a meager 11-point trading range. The index finished at its best level of the day as six sectors ended above their flat lines. In front of the pack, the commodity-sensitive energy (+1.8%) sector led financials (+1.0%), industrials (+0.4%), and technology (+0.4%). Conversely, countercyclical utilities (-0.6%), consumer staples (-0.5%), and health care (-0.2%) rounded out the leaderboard.

The financial sector (+1.0%) finished ahead of the broader market as positive quarterly results from Credit Agricole and ING (ING 11.43, +0.87) helped facilitate a rebound among European banking names. On the home front, American International Group (AIG 58.10, +3.96) boosted insurance names after the company beat top- and bottom-line estimates for the quarter and announced an additional $3 billion in share repurchases. Prudential (PRU 76.15, +2.18) and MetLife (MET 43.70, +1.49) gained a respective 3.0% and 3.5% ahead of this evening's quarterly earnings results.

The Dow Jones Transportation Average (+0.8%) outperformed as Avis Budget (CAR 36.89, +2.13) rebounded. The stock jumped 6.1% after posting better-than-expected guidance and mixed quarterly results. Separately, rail names also displayed relative strength as Union Pacific (UNP 92.87, +1.57) and CSX (CSX 28.20, +0.54) jumped 1.7% and 2.0%, respectively.

The heavily-weighted health care sector (-0.2%) ended beneath its flat line as Biogen (BIIB 321.34, -8.77) underperformed in the biotechnology sub-group. The stock finished lower by 2.7% after the company indicated that despite yesterday's reports, it has not received any acquisition offers. Elsewhere, Dow component Pfizer (PFE 35.29, -0.80) rounded out the price-weighted index as investors continue to weigh yesterday's quarterly results and conference call.

The U.S. Dollar Index (95.55, +0.49) finished off its best level of the day as the yen, pound, and euro each gave up ground to the greenback. The dollar/yen pair finished higher by 0.3% (101.20), rebounding from yesterday's 1.5% decline. The pound lost 0.3% against the dollar (1.3312) ahead of tomorrow's Bank of England policy statement while the euro declined 0.7% against the buck (1.1148).

The Treasury complex ended its day on a higher note as yields declined throughout the curve. The yield on the 10-yr note finished lower by two basis points at 1.54%.

Participation was above the recent average as more than 873 million shares changed hands on the NYSE floor.

Today's economic data included the weekly MBA Mortgage Index, the ADP Employment Change Report, and ISM Services for July:

The weekly MBA Mortgage Index showed a seasonally adjusted decrease of 3.5% in mortgage applications after declining 11.2% in the prior week.

The ADP Employment Change report was better than expected, showing an estimated 179,000 jobs (Briefing.com consensus 165,000) were added to private sector payrolls.

However, those gains weren't as robust as some might have hoped coming off last month's very large increase in nonfarm payrolls.

In addition, all of the growth in the ADP number for July came from the service-providing sector (185,000). The goods-producing sector lost 6,000 jobs, according to ADP.

The ISM Non-Manufacturing PMI dipped to 55.5 in July from 56.5 in June (Briefing.com consensus 55.8), declining from 59.6 in the same period a year ago.

The dividing line between expansion and contraction for the non-manufacturing sector is 50.0. July marked the 78th straight month of growth.

The headline disappointment, though, was offset to a large extent by the increases registered in the indexes for new orders (from 59.9 to 60.3), backlog of orders (from 47.5 to 51.0), and new export orders (from 53.0 to 55.5).

The biggest drags on the non-manufacturing index in July were the indexes for prices (from 55.5 to 51.9), supplier deliveries (from 54.0 to 51.0), inventories (from 55.5 to 54.0), employment (from 52.7 to 51.4), and imports (from 54.0 to 53.0).

It was noted in the report that the past relationship between the non-manufacturing PMI and the overall economy indicates that the 55.5 level for July corresponds to a 2.6% increase in real GDP on an annualized basis.

Tomorrow's economic data will include Challenger Job Cuts for July and weekly initial claims (Briefing.com consensus 264k), which will be released at 7:30 ET and 8:30 ET, respectively. The day's data will be capped off with Factory Orders for June (Briefing.com consensus -1.9%), which will cross the wires at 10:00 ET.

Russell 2000 +6.6% YTD

S&P 500 +5.9% YTD

Dow Jones +5.3% YTD

Nasdaq Composite +3.0% YTD