Day Traders Diary

10/4/16

 The stock market trades on a flat note at midday as participants maintain a holding pattern in the wake of recent macroeconomic developments and ahead of a data-heavy week. The S&P 500 (-0.3%) trades in-line with the Dow Jones Industrial Average (-0.3%) and behind the Nasdaq Composite (-0.1%).

Equity indices began the day on a choppy note, shrugging off a positive bias in global markets. Japan's Nikkei (+0.8%) extended its winning streak amid softening in the yen and upbeat commentary from Bank of Japan Governor Haruhiko Kuroda. Meanwhile, the UK's FTSE (+1.2%) paced the advance in Europe as the pound extended its recent loss. Sterling slipped to a 31-year low (1.2720) against the dollar overnight after UK Prime Minister Theresa May stated yesterday that the country will trigger Article 50 of the Lisbon Treaty by the end of March 2017.

The benchmark index maintained a narrow 12-point trading range through the first half as rising rates, a stronger dollar, and developments in Europe restricted risk appetite. The U.S. Dollar Index (96.22, +0.53, +0.56%) floats off its session high after the euro narrowed its loss against the greenback. The move was prompted by reports that the European Central Bank is nearing a consensus on tapering its quantitative easing program before the anticipated end. ECB President Draghi stated during his most recent press conference that there was no discussion of extending the asset purchase program beyond March 2017. Furthermore, it makes sense to taper purchases in a way similar to what the Federal Reserve did in 2014.

The S&P 500 (-0.3%) floats in the bottom of today's trading range, testing technical support near its 20-day simple moving average (2154.68). Nine sectors trade in the red with consumer staples (-0.5%), materials (-0.7%), telecom services (-1.2%), real estate (-1.2%), and utilities (-1.6%) rounding out the leaderboard. Conversely, heavily-weighted technology (+0.1%) and financials (+0.8%) outperform.

The financial sector (+0.8%) outperforms as the group moves higher alongside European financial names. Deutsche Bank (DB 13.21, +0.23) and Credit Suisse (CS 13.40, +0.32) trade higher by 1.9% and 2.5%, respectively. Deutsche Bank recently made headlines as speculation arose that the German lender is considering capital increases and freezing bonuses. Capital standing has been in focus for the bank after the Department of Justice initially fined the lender $14 billion for its part in the mortgage-backed securities crisis. Meanwhile, Citigroup (C 48.15, +1.12) and Bank of America (BAC 15.98, +0.35) trade higher by 2.3% apiece.

In the technology sector (+0.1%), top-weighted Apple (AAPL 113.48, +0.96) outperforms, gaining 0.9%. The name is also boosting chipmakers as iPhone suppliers outperform in the PHLX Semiconductor Index (+0.4%). Alphabet (GOOG 776.54, +3.98) is little changed following a product launch event. The company unveiled new phones, a smart home hub, and other devices.

The consumer staples sector (-0.5%) underperforms as defensively-oriented groups remain pressured by rising rates. In the group, Dollar Tree (DLTR 76.56, -2.97) has declined 3.7% after being downgraded to "Neutral" from "Buy" at Cleveland Research. Meanwhile, Dr Pepper Snapple (DPS 87.07, -3.69) has declined by 4.1% after being downgraded to "Hold" from "Buy" at Evercore ISI.

On the earnings front, Darden Restaurants (DRI 61.88, +0.53) has gained 0.9% after beating bottom-line estimates for the quarter. The company also raised its full-year guidance above consensus.

Treasuries continue to trade on a lower note, pushing up yields throughout the complex. The yield on the 2-yr note is higher by two basis points (0.82%) while the yield on the 10-yr note is higher by five basis points (1.68%).

There was no economic data of note released today.