Day Traders Diary

11/1/16

 The stock market ended the Tuesday affair on a lower note as equities endured a broad-based selloff. The downturn was stoked by rising political uncertainty, further losses in crude oil, volatility in the Treasury market, and weakness in the heavily-weighted technology (-0.8%) and consumer discretionary (-0.8%) sectors. The Russell 2000 ended down 1.0% while the Nasdaq Composite (-0.7%) and the S&P 500 (-0.7%) each finished with narrower losses.

Equity indices stumbled in the first hour of trade as a move higher in bond yields and shifting U.S. polling data derailed an initial move higher. Mixed U.S. economic data halted a retreat in the Treasury complex this morning. The October ISM Index registered at 51.9 (Briefing.com consensus 51.7), signaling continued expansion. Meanwhile, September Construction Spending fell 0.4% (Briefing.com consensus +0.5%) after declining 0.5% in the prior month.

The Treasury complex carved out a session low in the opening hour of trade, pressuring defensively-oriented real estate (-2.0%), utilities (-1.8%), and telecom services (-1.0%). The yield on the benchmark 10-yr note rose to 1.88% in the opening hour before backpedaling from that level.

The U.S. presidential race was also in focus today after a new joint poll conducted by ABC News and the Washington Post showed that Republican nominee Donald Trump is leading Democratic nominee Hillary Clinton. The reversal of fortune comes on the heels of last Friday's announcement that the FBI is investigating Mrs. Clinton regarding recently-discovered emails.

The poll unnerved participants who had previously priced in a Clinton presidency. Accordingly, the CBOE Volatility Index (VIX 18.58, +1.52) rose more than one point.

The broader market narrowed its loss in the final hour, but ten sectors finished in negative territory. The heavily-weighted consumer discretionary (-0.8%) and the technology (-0.8%) sectors finished behind the broader market.

Retail names underperformed in the consumer discretionary space (-0.8%) as L Brands (LB 66.50, -5.69) plunged 7.9%. The company issued an earnings warning, stating that it sees third-quarter earnings in the lower end of previously issued guidance. The company also estimated that October same-store sales would be short of consensus estimates, rising just 1.0%. The broader SPDR S&P Retail ETF (XRT 41.53, -0.70) fell 1.7%.

The technology sector (-0.9%) displayed relative weakness as top-weighted Apple (AAPL 111.47, -2.07) fell by 1.8%. The name was under pressure after a UBS Survey indicated that demand in China remains weak. The stock has declined 5.7% since the company reported underwhelming quarterly results and guidance last Tuesday. Elsewhere, the PHLX Semiconductor Index fell 0.9%.

In the health care sector (-0.5%), Dow component Pfizer (PFE 31.07, -0.64, -2.0%) finished at the bottom of the price-weighted average. The pharmaceutical name reported weaker-than-expect bottom line results and narrowed its full-year guidance. Separately, the biotechnology sub-group outperformed as the iShares Nasdaq Biotechnology ETF (IBB 259.09, +2.41) gained 0.9%.

The commodity-sensitive energy space (+0.1%) eked out a slim gain as crude erased the bulk of an intraday loss, shedding 0.3% to $46.68/bbl. Investors will receive the latest inventory data from the American Petroleum Institute this evening while the Department of Energy will release its more influential inventory data tomorrow morning at 10:30 ET.

Bond prices jumped in the late afternoon as extended losses in equities and some short covering pushed yields lower. The yield on the 10-yr note finished the day up one basis point (1.84%).

Today's trading volume was above the average of 850 million as more than one billion shares changed hands at the NYSE floor.

Today's economic data was limited to September Construction Spending and the October ISM Index:

The ISM Manufacturing Index for October checked in at 51.9 (Briefing.com consensus 51.7), up from 51.5 in September.

Construction spending declined 0.4% in September (Briefing.com consensus +0.5%) on the heels of an upwardly revised 0.5% decline (from -0.7%) for August.

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

Tomorrow's economic data will include the 7:00 ET release of the weekly MBA Mortgage Index and the 8:15 ET release of the ADP Employment Change Report for October (Briefing.com consensus 165k). Separately, the Fed will issue its November Policy Statement at 14:00 ET.