Day Traders Diary

10/10/16

 The major averages began the week on a higher note, aided by a rebound in European markets, a rally in crude oil futures, and the outperformance of market heavyweight Apple (AAPL 116.06, +2.00). The Nasdaq Composite (+0.7%) settled ahead of both the Dow Jones Industrial Average (+0.5%) and the S&P 500 (+0.5%).

Long-term interest rate concerns shifted out of focus slightly as thin trading conditions and a holiday closure for the U.S. bond market kept a lid on recent rate angst. Today's action was largely headline driven as positive commentary from oil figures and specific company catalysts led to a higher start to the week. Investors also looked ahead to the start of the third quarter earnings reporting season. Alcoa (AA 31.51, +0.14) will kick things off when the company reports quarterly results ahead of Tuesday's open.

Crude oil extended its recent winning streak after Russian President Vladimir Putin signaled that he supports freezing or even cutting Russian oil production. The commentary comes on the heels of OPEC's recently-proposed output cap. Elsewhere, Saudi Arabia's oil minister also contributed to the positive bias when he suggested that oil prices could reach $60.00/bbl before the end of the year. WTI crude finished the day higher by 3.1% ($51.32/bbl, +$1.56).

The major averages carved out session highs in the first hour of trade, yet buying interest tapered off in a slow, steady fashion during the remainder of the session.

All 11 sectors finished with a gain.  The energy (+1.5%), utilities (+0.8%), and technology (+0.7%) sectors led the advance. The industrials sector (+0.02%) brought up the rear, held back by an earnings warning from Dover (DOV 66.69, -5.55), which followed on the heels of Honeywell's (HON 106.80, -0.14) profit warning on Friday. 

In the technology space (+0.8%), Apple (AAPL 116.06, +2.00) outperformed after Samsung opted to provisionally adjust its Galaxy 7 smartphone production schedule. The company is seeking to better control quality and safety standards. Meanwhile, Twitter (TWTR 17.56, -2.29) was a story stock throughout the day as various reports highlighted waning takeover interest in the company. The social media name tumbled 11.5% on the news, but finished off its session low. Late headlines indicated Twitter could still be acquired, but most likely only at a lower price level.

The economically-sensitive financial sector (+0.5%) outperformed as the fed funds futures market continued to price in a higher probability (now 70%) of a rate hike at the December FOMC meeting. Participants will look for further clues regarding the rate hike picture when the FOMC Minutes from the September 21 meeting cross the wires at 2:00 p.m. ET on Wednesday.

Biotechnology ended ahead of the broader health care space (+0.4%), evidenced by the 1.4% gain in the iShares Nasdaq Biotechnology ETF (IBB 288.07, +3.97). Mylan (MYL 38.87, +2.93) surged 8.2% after announcing that it settled claims related to the misclassification of its EpiPen device under the Medicaid rebate program. Mylan agreed to pay $465 million to resolve all potential liability claims by federal and state governments. Separately, Bristol Myers (BMY 49.81, -5.62) plunged 10.1% after Merck's (MRK 63.90, +1.13) Keytruda medication beat out its competing treatment.

The PHLX Semiconductor Index (-0.5%) erased an early gain as Qualcomm (QCOM 67.25, -0.94) ended lower by 1.4%.

The U.S. bond market was closed in observance of Columbus Day. The 10-yr yield settled at 1.72% last Friday.

Today's participation was below the recent average as fewer than 667 million shares changed hands at the NYSE floor.

With the bond market closed today, there were no economic releases. There aren't any major economic releases on Tuesday's economic calendar either.

Russell 2000: +10.1% YTD

Nasdaq Composite: +6.4% YTD

S&P 500: +5.9% YTD

Dow Jones +5.2% YTD