Day Traders Diary

8/10/16

 The stock market ended the midweek affair on a modestly lower note as weakness from the oil patch applied pressure to the broader market. For the most part, equities endured another quiet session as the quarterly earnings reporting season continues to taper off. Today's trade also featured a bid in Treasuries, softening in the dollar, and relative weakness from the heavily-weighted technology (-0.3%), health care (-0.4%), and financial (-0.8%) sectors. The Nasdaq Composite (-0.4%) settled behind the S&P 500 (-0.3%) and the Dow Jones Industrial Average (-0.2%).

The major averages vacillated at the start of the session as investors responded to a modest downturn in global markets and a mixed set of U.S. quarterly earnings reports. European averages paced the retreat as weaker-than-expected stockpile data from the American Petroleum Institute weighed on the energy component. Conversely, OPEC's Oil Market Report for August added some early support to the commodity. The oil collective increased its demand outlook for 2016, estimating that demand growth will average 1.22 million barrels per day.

The major averages yielded to selling pressure in the late morning as investors pored over the Energy Information Administration's latest stockpile data. The Department of Energy reported that crude oil inventories rose by 1.055 million barrels (estimated: -1.025 million barrels), but that gasoline inventories fell by 2.807 million barrels (estimated: -1.063 million barrels). In response, WTI crude slipped from the $42.00/bbl price level and ended its day lower by 2.3% ($41.76/bbl; -$0.98).

The S&P 500 (-0.3%) endured a range-bound session, maintaining a meager 11-point trading range. The index finished near its worst level of the day while four sectors ended above their flat lines. In front of the pack, countercyclical consumer staples (+0.4%) and telecom services (+0.3%) outperformed while energy (-1.4%) financials (-0.8%), health care (-0.4%), and technology (-0.3%) ended with the largest losses.

The economically-sensitive financial sector (-0.8%) demonstrated broad-based weakness as the group saw pressure from declining long-term interest rates. In the group, Wells Fargo (WFC 48.18, -0.75) and Bank of America (BAC 14.81, -0.38) declined 1.5% and 2.5%, respectively. Elsewhere, MetLife (MET 40.15, -1.13) weighed on the life insurance sub-group, extending its post-earnings loss to 8.1%. The broader sector trimmed its monthly gain to 0.9% and returned to negative territory on a year-to-date basis (UNCH).

Biotechnology weighed on the health care space (-0.4%) as the iShares Nasdaq Biotechnology ETF (IBB 288.81, -5.75) ended lower by 2.0%. In the ETF, Mylan Labs (MYL 48.79, -1.13) underperformed after reporting a mixed quarter. The group also traded lower in sympathy with specialty pharmaceutical name Perrigo (PRGO 86.00, -9.09). The company disappointed investors with its quarterly results and guidance. The broader ETF sports a monthly loss of 0.2%, which compares to a decline of 1.0% in the broader sector.

The Dow Jones Transportation Average (-0.4%) ended its day behind the benchmark index as cautious revenue guidance from Southwest Air (LUV 36.99, -0.47) weighed. Southwest trimmed its revenue per available seat mile guidance for the third quarter ahead of today's open. The broader U.S. Global Jets ETF (JETS 22.13, -0.17) ended the day lower by 0.8%.

In the consumer discretionary (+0.2%) sector, retail names outperformed as they gained alongside Fossil (FOSL 30.57, +0.21) and Ralph Lauren (RL 103.14, +8.07). The two names reported above-consensus quarterly results and issued better-than-expected guidance. Separately, Dow component Disney (DIS 97.86, +1.19) ended higher by 1.2% after topping bottom-line estimates for the quarter.

The U.S. Dollar Index (95.65, -0.53) finished broadly lower as the pound, euro, and yen each ended with gains against the greenback. The pound/dollar pair gained 0.1% (1.3013) while the single currency advanced 0.6% against the dollar (1.1176). Elsewhere, the dollar lost 0.6% against the safe-haven yen (101.29) as investors reacted to a positive reading of Japan's Core Machinery Orders for June (+8.3% month-over-month; expected 3.1%).

Treasuries ended higher as yields slid throughout the complex. The yield on the 10-yr note settled lower by four basis points (1.51%).

Today's participation was below the recent average as fewer than 745 million shares changed hands at the NYSE floor.

Today's economic data included the weekly MBA Mortgage Index, the Job Openings and Labor Turnover Survey for June, and the Treasury Budget for July:

The weekly MBA Mortgage Index showed a seasonally adjusted increase of 7.1% in mortgage applications after declining 3.5% in the prior week.

The June Job Openings and Labor Turnover Survey showed that job openings increase to 5.624 million from a revised 5.514 million (from 5.500 million) in May.

The Treasury Budget for July showed a deficit of $112.8 billion versus a deficit of $149.2 billion in July 2015.

The Treasury Budget data is not seasonally adjusted, so the July deficit cannot be compared to the $6.3 billion surplus registered in June.

Total receipts in July were $210.0 billion while total outlays were $322.8 billion.

Receipts were $15.5 billion less than receipts in July 2015. Total outlays, meanwhile, were $51.9 billion less than the same period a year ago.

The 12-month deficit narrowed to $487.2 billion from $523.6 billion in June.

Tomorrow's economic data will include weekly initial claims (Briefing.com consensus 266k) and Import/Export Prices for July, which will each cross the wires at 8:30 ET.

Russell 2000 +7.7% YTD

S&P 500 +6.4% YTD

Dow Jones +6.1% YTD

Nasdaq Composite +3.9% YTD