Day Traders Diary

8/24/16

The stock market ended the midweek affair on a lower note as a weaker-than-expected reading of existing home sales for July and a downturn in crude oil pressured the broader market. Other focal points impacting today's trade included a rebound in the dollar, caution ahead of Friday's speech from Fed Chair Yellen, and relative weakness from the heavily-weighted technology (-0.5%) and health care (-1.6%) sectors. The Nasdaq Composite (-0.8%) finished behind the S&P 500 (-0.5%) and the Dow Jones Industrial Average (-0.4%).

The major averages slipped at the beginning of the session as investors responded to a downturn in crude oil and a weaker-than-expected Existing Home Sales Report for July. Crude oil futures were under pressure overnight after the American Petroleum Institute reported a larger-than-expected build in crude oil stockpiles. Separately, existing home sales for July came in at an annualized rate of 5.39 million units (Briefing.com consensus 5.54 million), declining 3.2% from June's unrevised 5.57 million units.

Crude oil extended its loss after the Department of Energy confirmed API's disappointing inventory data. The EIA disclosed that crude oil stockpiles rose by 2.50 million barrels (consensus: -0.45 million) while gasoline inventories increased by 0.03 million barrels (consensus: -1.66 million). As a result, WTI crude ended its day lower by 2.9% ($46.76/bbl; -$1.39), extending its week-to-date loss to 4.7%.

The benchmark index extended its loss near midday as a downturn in the biotechnology sub-group pressured the heavily-weighted health care (-1.6%) sector. The S&P 500 (-0.5%) violated its 20-day simple moving average (2177.84) in the final hour, finding support near the 2170 price level. Nine sectors ended in the red with materials (-1.2%) and health care (-1.6%) acting as noticeable laggards. Conversely, the utilities (UNCH) sector finished the day flat.

Biotechnology weighed on the health care space (-1.6%), evidenced by the 3.4% decline in the iShares Nasdaq Biotechnology ETF (IBB 286.23, -9.95). In the ETF, Mylan Labs (MYL 43.15, -2.47) led to the downside after a White House spokesperson and the American Medical Association each voiced concerns regarding the company's drug pricing practices. Several U.S. lawmakers have criticized Mylan for excessive costs associated with the company's EpiPen device. The stock has declined 11.3% this week, which compares to a loss of 1.4% in the broader sector.

In the technology sector (-0.5%), large cap components Facebook (FB 123.48, -0.89) and Apple (AAPL 108.03, -0.82) underperformed, losing 0.7% and 0.8%, respectively. Top-weighted Apple was under pressure after reports indicated that co-founder Steve Wozniak is cautious about the notion of removing a headphone jack from the upcoming model of the iPhone. Intuit (INTU 109.85, -3.99) declined 3.5% as cautious first-quarter guidance overshadowed above-consensus fourth-quarter results.

The consumer discretionary space (-0.5%) displayed relative weakness as retail names pressured the sector. The SPDR S&P Retail ETF (XRT 45.62, -0.54) ended lower by 1.2% as quarterly results from La-Z-Boy (LZB 24.24, -3.96) and Express (EXPR 11.94, -4.09) weighed on the sub-group.

The U.S. Dollar Index (94.76, +0.22, +0.24%) ended higher as the yen and euro lost ground to the greenback. The dollar gained 0.2% against the safe-haven yen (100.47) while the single currency slipped 0.4% against the buck (1.1266).

Treasuries ended on a mixed note as the long end of the curve displayed relative weakness. The yield on the benchmark 10-yr note finished higher by one basis point at 1.56%.

Today's participation was below the recent average as fewer than 737 million shares changed hands at the NYSE floor.

Today's economic data included the weekly MBA Mortgage Index, the FHFA Housing Price Index for June, and the Existing Home Sales Report for July:

The MBA Mortgage Index showed that mortgage applications fell 2.1% in the week ending August 20 after a 4.0% decline in the prior week.

The FHFA Housing Price Index for June rose 0.2%, which followed an increase of 0.2% in May.

Existing home sales in July declined 3.2% to a seasonally adjusted annual rate of 5.39 million (Briefing.com consensus 5.54 million) from June's unrevised sales pace of 5.57 million

June's sales pace was the highest since February 2007.

Existing home sales are being crimped due to limited inventory and high prices, both of which are leading to reduced buyer traffic in general and the tepid involvement of first-time buyers specifically.

For further details on these economic releases, be sure to visit Briefing.com's Economic Calendar page.

Tomorrow's economic data will include weekly initial claims (Briefing.com consensus 265k) and Durable Goods Orders for July (Briefing.com consensus 3.5%), which will each cross the wires at 8:30 ET.

Russell 2000 +8.9% YTD

S&P 500 +6.4% YTD

Dow Jones  +6.1% YTD

Nasdaq Composite  +4.2% YTD