Day Traders Diary

10/24/16

 The major averages began the week on an upbeat note as an upswing in M&A activity and sector leadership from the top-weighted technology (+1.1%) space bolstered the broader market. The Nasdaq Composite (+1.0%) finished ahead of both the S&P 500 (+0.5%) and the Dow Jones Industrial Average (+0.4%).

A recent wave of M&A chatter materialized this weekend when several high-profile deals were announced after Friday's close. AT&T (T 36.86, -0.63, -1.7%) and Time Warner (TWX 86.78, -2.70, -3.0%) made headlines on Saturday after the telecom giant agreed to pay $107.50 per share for Time Warner. The deal is valued at $85.4 billion and marks a premium of 20.1% over Friday's closing price. Meanwhile, Rockwell Collins (COL 79.21, -5.25, -6.2%) agreed to acquire BE Aerospace (BEAV 58.89, +8.28, +16.4%) for $62.00 per share, which will amount to $8.3 billion in total consideration. The size and scope of the deals stoked risk appetite as investors looked for further consolidation.

The benchmark index notched a high at the start of the session and inched off that level throughout the morning.

A downturn in crude oil futures contributed to the mid-morning pullback as investors assessed the state of OPEC's proposed supply freeze agreement. Iraq made headlines this morning after indicating that it will seek an exemption from the previously discussed agreement. However, selling remained in check after Iran stated that it would encourage other members to join the output freeze. Crude oil briefly broke below $50.00/bbl before settling at $50.52/bbl (-0.7%; -$0.33).

The Treasury complex pulled back today as an upswing in equities and above-consensus economic data weighed on the group. Bond prices extended their decline after U.S. Manufacturing PMI for October came in ahead of estimates. The yield on the 2-yr note finished higher by two basis point (0.84%) while the yield on the benchmark 10-yr note rose three basis points to 1.76%. The spread between the 2-yr and 10-yr yields expanded to 92 basis points from September's 83 basis point differential.

The benchmark index finished in the upper end of today's trading range, locking in the bulk of today's gain.

Eight sectors ended in the green with technology (+1.2%), consumer staples (+0.7%), and consumer discretionary (+0.7%) outperforming. On the other hand, telecom services (-0.8%) and energy (-0.2%) finished at the bottom of the board.

The heavyweight technology space (+1.2%) outperformed as participants continued to assess influential quarterly reports from the sector and looked ahead to a busy week on the earnings calendar. Dow component Microsoft (MSFT 61.00, +1.34) jumped 2.3%, extending its post-earnings gain to 6.6%. The name beat analysts' estimates last Thursday. Meanwhile, Alphabet (GOOG 813.11, +13.74) gained 1.7% ahead of releasing its quarterly results Thursday evening.

In the consumer discretionary sector (+0.7%) Amazon (AMZN 837.71, +18.72) gained 2.3% after Goldman Sachs raised its price target on the stock to $1050 from $920. The name is also scheduled to release its quarterly report this Thursday. Conversely, media company underperformed as investors looked ahead to potential regulatory hurdles that AT&T and Time Warner will face in their merger attempt.

Aerospace and defense names outperformed in the industrial sector (+0.3%) as the sub-group drafted higher alongside BE Aerospace (BEAV 58.89, +8.28). Dow component Boeing (BA 137.45, +1.82) finished ahead of the price-weighted average. Conversely, rail names underperformed as Union Pacific (UNP 89.88, -0.49) fell 0.5%.

Today's trading volume was below the average of 853 million as 779 million shares changed hands at the NYSE floor.

There was no economic data of note released today.

Tomorrow's economic data will include the 9:00 ET release of the Case-Shiller 20-city Index for August (Briefing.com consensus 5.1%) and the FHFA Housing Price Index for August. Separately, Consumer Confidence for October (Briefing.com consensus 100.8) will cross the wires at 10:00 ET.

Russell 2000: +8.0% YTD

Nasdaq Composite: +6.0% YTD

S&P 500: +5.3% YTD

Dow Jones: +4.6% YTD