Day Traders Diary

8/11/16

The stock market trades on a higher note at midday as the major averages respond to the latest round of quarterly earnings results and a rebound in crude oil. Other focal points impacting today's trade have included softening in the dollar and strong sector leadership from the industrial (+0.6%), health care (+0.6%), and consumer discretionary (+0.9%) sectors. The Dow Jones Industrial Average (+0.7%) leads the benchmark index (+0.5%) and the Nasdaq Composite (+0.5%).

Today's session began on a higher note as investors weighed better-than-expected earnings results from the likes of Kohl's (KSS 43.90, +5.86) and Macy's (M 39.90, +5.90). The two department stores rallied in response, adding support to the retail sub-group and the broader market. A rebound in crude oil has also buttressed today's move higher as oil shrugs off a mixed reading of the International Energy Agency's monthly report.

The IEA estimates that global oil demand growth will slow from 1.4 million barrels per day in 2016 to 1.2 million barrels per day in 2017. This compares to its prior outlook, which projected next year's global demand growth at 1.3 million barrels per day. The organization believes that the supply overhang will be gone by the end of this year. WTI crude currently trades higher by 4.4% ($43.56/bbl; +$1.86), erasing yesterday's 2.3% loss. For the week, the energy component sports an advance of 4.1%.

The benchmark index is on pace to notch a new all-time closing high, testing resistance near the 2186/2187 price level. Nine sectors currently trade in positive territory with industrials (+0.6%), health care (+0.6%), consumer discretionary (+0.9%), and energy (+1.6%) leading the pack. Conversely, defensively-oriented utilities (-0.2%) underperform amid rising Treasury yields.

Retail names outperform in the consumer discretionary space (+0.9%) as the group gains alongside Kohl's (KSS 43.90, +5.86) and Macy's (M 39.90, +5.90). The SPDR S&P Retail ETF (XRT 45.11, +0.92) has jumped 2.1%, sporting a weekly gain of 0.6%. Separately, influential Netflix (NFLX 95.86, +1.93) has climbed 2.1% after a Director disclosed the purchase of 300,000 shares. The purchase is valued at approximately $28.3 million. The broader sector shows a gain of 0.5% for the week, leading the benchmark index (+0.5%; week-to-date: +0.2%).

The Dow Jones Transportation Average (+0.7%) outperform as airlines rebound. The U.S. Global Jets ETF (JETS 22.39, +0.26) has jumped 1.2%, narrowing yesterday's 0.8% loss. In the group, Alaska Air (ALK 66.46, +1.62) leads after providing improved third-quarter fuel cost and consolidated income guidance. The Transportation Average has slipped 0.1% this week, which compares to a week-to-date gain of 0.6% in the broader industrial sector (+0.6%).

The countercyclical health care space (+0.6%) demonstrates relative strength as biotechnology outperforms. The iShares Nasdaq Biotechnology ETF (IBB 292.53, +3.72) has jumped 1.3%, narrowing its week-to-date loss to 1.6%. In the group, Dow component Merck (MRK 63.53, +0.89) has gained 1.4% as it trades ahead of the price-weighted index. On the flipside, Valeant Pharmaceuticals (VRX 24.91, -2.41) has tumbled 8.8% after reports indicated that the Southern District of New York is investigating the company. The investigation reportedly involves the company's prior relationship with Philidor Rx Services.

The U.S. Dollar Index (95.79, +0.14) sports a modest gain as the euro, yen, and pound lose ground against the buck. The euro/dollar pair has ticked lower by 0.3% (1.1151) while cable has declined 0.4% (1.2963). Separately, the dollar has gained 0.4% against the safe-haven yen (101.73).

Treasuries hover near session lows as yields rise through the curve. The yield on the 10-yr note has risen five basis points to 1.55%.

Today's economic data was limited to weekly initial claims and Import/Export Prices for July:

Initial claims for the week ending August 6 were 266,000 (Briefing.com consensus 266,000) versus a downwardly revised 267,000 (from 269,000) in the prior week.

There were no special factors influencing the initial claims reading, which was below 300,000 for the 75th consecutive week -- the longest streak since 1970

The four-week moving average increased to 262,750 from 259,750

Continuing claims for the week ending July 30 increased by 14,000 to 2.155 million

The four-week moving average is 2.143 million, up 500 from the prior week

Import prices for July increased 0.1% on top of a 0.6% increase in June.

The key difference is that the uptick in July was led by increasing nonfuel prices, which were up 0.3% after declining 0.2% in June.

Import prices fell 3.7% year-over-year and have not recorded a 12-month advance since two years ago when they rose 0.9% between July 2013 and July 2014

Import prices, excluding fuel, were up 0.3% after declining 0.2% in June

On a year-over-year basis, import prices, excluding fuel, are down 1.2%

Export prices for July were up 0.2% after increasing 0.8% in June, led by higher nonagricultural prices

Export prices declined 3.0% year-over-year and have not advanced on a year-over-year basis since August 2014

Excluding agriculture, export prices were up 0.3% on the heels of a 0.5% increase in June

On a year-over-year basis, export prices, excluding agriculture, are down 3.0%