Day Traders Diary

9/27/16

 The stock market ended the Tuesday affair on a higher note as a reversal in the economically-sensitive financial (+0.9%) sector fostered a rebound in the broader market. Other factors impacting today's trade included regrouping after last evening's U.S. presidential debate and strong sector leadership from heavily-weighted consumer discretionary (+1.0%) and technology (+1.2%). The Nasdaq Composite (+0.9%) led the Dow Jones Industrial Average (+0.7%) and the S&P 500 (+0.6%).

Equity indices rose at the start of the session as investors eyed a rebound in the financial space (+0.9%). The group fell 1.5% on Monday as a downturn in European banking names weighed. Deutsche Bank (DB 11.92, +0.07) plunged 7.1% in the prior session after German Chancellor Angela Merkel indicated that the bank would not be eligible for state aid in the event of a capital shortfall. The news continued to weigh on the stock during the overnight session, but shares erased today's losses by afternoon trade. U.S.-listed issues of Deutsche Bank finished higher by 0.6%.

The turnaround in beleaguered financials helped boost risk appetite in the broader market while heavily-weighted industrials (+0.8%), consumer discretionary (+1.0%), and technology (+1.2%) also displayed strength. The broader market was in rally mode after the first U.S. presidential debate went off without major surprises. The CBOE Volatility Index (VIX 13.11, -1.39, -1.23%) declined more than one point after carving out a session high of 14.63% on Monday.

Oil prices remained a weak spot for the second day in a row as the energy component was pressured by developments from Algiers, Algeria. Reports from the International Energy Forum indicated that OPEC and non-OPEC producers were unable to reach a supply control agreement. Furthermore, Saudi Energy Minister Khalid al-Falih stated that he does not expect to reach an agreement during tomorrow's meeting. The energy minister did indicate that the topic could be revived in time for the oil cartel's November 30 meeting. WTI crude finished the day lower by 2.6% ($44.67/bbl; -$1.18).

The benchmark index narrowed its week-to-date loss to 0.2% as eight sectors finished in the green with consumer discretionary (+1.0%) and technology (+1.2%) leading the pack. Conversely, defensively-oriented utilities (-1.3%) and real estate (-0.8%) trailed energy (-0.5%) on the bottom of the leaderboard.

In the technology sector (+1.2%), Alphabet (GOOG 783.01, +8.80) and Microsoft (MSFT 57.95, +1.05) finished higher by 1.1% and 1.9%, respectively. The two names rose following recent speculation that they are mulling takeover offers for Twitter (TWTR 23.72, +0.35). Recall that Salesforce.com (CRM 70.05, -0.14) and Disney (DIS 91.72, -0.24) have also been identified as parties expressing interest in Twitter. Separately, the PHLX Semiconductor Index ended higher by 1.7%, erasing a modest monthly loss.

The consumer discretionary space (+1.0%) also displayed relative strength as F.A.N.G. members Amazon (AMZN 816.11, +16.95) and Netflix (NFLX 97.07, +2.51) outperformed after receiving target price increases from JP Morgan. Separately, Dow component Nike (NKE 55.34, +0.94) rallied 1.7% ahead of this evening's quarterly earnings report.

Domestic banking names paced the advance in the financial sector (+0.9%) as Citigroup (C 46.37, +0.48) and Bank of America (BAC 15.29, +0.20) rebounded 1.1% and 1.3%, respectively. Meanwhile, Wells Fargo (WFC 45.09, +0.21) inched higher by 0.5% after multiple sources signaled that the company is considering executive compensation clawbacks. On a related note, CEO John Stumpf is slated to appear before the House Financial Services Committee on Thursday.

Treasuries ended on a higher note with the long end of the curve outperforming. The yield on the 2-yr note finished flat (0.75%) while the yield on the 10-yr note finished lower by two basis points (1.56%).

Today's participation was below the recent average as fewer than 827 million shares changed hands on the NYSE floor.

Today's economic data included the Case-Shiller 20-city Index for July and Consumer Confidence for September:

The Case-Shiller 20-city Home Price Index for July rose 5.0%, which was below the Briefing.com consensus of 5.1%. This followed the previous month's unrevised reading of 5.1%.

The Conference Board's Consumer Confidence Index for September checked in at 104.1 (Briefing.com consensus 98.0) after an upwardly revised 101.8 reading (from 101.1) for August.

The September number is the highest since August 2007.

Tomorrow's economic data will include the weekly MBA Mortgage Index and Durable Orders for August (Briefing.com consensus -1.9%), which will cross the wires at 7:00 ET and 8:30 ET, respectively.  The Department of Energy will release its weekly inventory report tomorrow at 10:30 ET.

Russell 2000: +9.6% YTD

Nasdaq: +6.0% YTD

S&P 500: +5.7% YTD

Dow Jones: +4.6% YTD