Day Traders Diary

11/7/16

The stock market began the week on a broadly higher note as diminished political uncertainty boosted risk appetite ahead of tomorrow's US presidential race. The Nasdaq Composite (+2.4%) finished slightly ahead of both the S&P 500 (+2.2%) and the Dow Jones Industrial Average (+2.1%).

The benchmark index avoided a tenth consecutive decline after FBI Director James Comey confirmed that he will not recommend that criminal charges be brought against Democratic presidential nominee Hillary Clinton. Recall that Mr. Comey made waves on October 28 by re-opening the probe into Mrs. Clinton's emails. The move followed the discovery of new emails from the former Secretary of State in an unrelated investigation.

The "October Surprise" fueled a flight from risk assets, feeding into a nine-session losing streak for the S&P 500. This also corresponded with a six-point move in the CBOE Volatility Index (18.73, -3.78, -16.9%) by last Friday's settlement. However, the decline in the broader market remained rather orderly, amounting to only a 1.9% loss over the entire nine session stretch.

Today's buying interest also appeared somewhat methodical as heavily-weighted financials (+2.6%), industrials (+2.5%), health care (+2.4%), and technology (+2.3%) paced the advance. The controlled action likely came with the understanding that the presidential race remains fairly tight. A number of presidential polls indicate that neither candidate holds a meaningful lead beyond the margin of error. Furthermore, congressional contests also bear their own risk for headline volatility as the market appears to favor a divided government outcome. 

The S&P 500 (+2.2%) retraced all of its loss going back to October 28. All 11 sectors settled in the green with financials (+2.6%) and industrials (+2.5%) ahead of the pack.

The economically-sensitive financial sector (+2.6%) outperformed amid steepening in the yield curve, a rebound in crude oil futures, and positive quarterly results from European banking names. HSBC (HSBC 38.49, +1.46, +3.9%) issued some upbeat quarterly results ahead of today's session. Meanwhile, Dow component Goldman Sachs (GS 181.48, +5.56, +3.2%) finished ahead of the price-weighted average.

In the industrial sector (+2.5%), Rockwell Automation (ROK 124.24, +6.68) gained 5.7% after beating consensus estimates for the quarter and guiding full-year revenue estimates above consensus. Trucking names also led as Cummins (CMI 130.34, +6.03) rose 4.9% after being upgraded to "Buy" from "Hold" at Evercore ISI.

Biotechnology outperformed in the health care sector (+2.4%), evidenced by the 3.8% gain in the iShares Nasdaq Biotechnology ETF (IBB 261.17, +9.47). The ETF jumped as it recovered from last week's 3.4% decline. In the group, Biogen (BIIB 295.62, +18.62) spiked 6.7% after being upgraded to "Overweight" from "Neutral" at Piper Jaffray. Meanwhile, Humana (HUM 174.97, +7.49, +4.5%) led managed care names after last week's earning beat.

In the technology sector (+2.3%), Dow components Intel (INTC 34.68, +1.07) and Microsoft (MSFT 60.44, +1.73) gained 3.2% and 3.0%, respectively. Intel finished at the top of the price-weighted average.

Treasuries finished on a lower note as the long end of the curve underperformed. The yield on the 2-yr note finished higher by three basis points (0.82%) while the yield on the 10-yr note ended up five basis points (1.83%).

Today's trading volume was above the average of 861 million as more than 889 million shares changed hands at the NYSE floor.

Today's economic data was limited to the Consumer Credit report for September:

Total outstanding consumer credit increased by $19.3 billion in September (Briefing.com consensus $17.5 billion) after increasing an upwardly revised $26.8 billion (from $25.9 billion) in August.

Tomorrow's economic data will be limited to the Job Openings and Labor Turnover Survey for September, which will be released at 10:00 ET.

Russell 2000: +5.0% YTD

Dow Jones: +4.8% YTD

S&P 500: +4.3% YTD

Nasdaq Composite: +3.2% YTD