Day Traders Diary

11/9/16

The stock market ended the Wednesday affair on a broadly higher note as participants re-positioned to account for a Donald Trump presidency. Mr. Trump recorded an upset victory against Democratic presidential nominee Hillary Clinton last evening. The Dow Jones Industrial Average (+1.4%) finished ahead of both the S&P 500 (+1.1%) and the Nasdaq Composite (+1.1%).

Global markets endured a volatile overnight session as unexpected results in the US presidential race caught investors offside. Political pundits and recent polling data were proved wrong as Mr. Trump clinched the 270 electoral votes necessary to become the 45th President of the United States. The Republican nominee also helped ensure that the GOP maintained control of both houses of Congress.

The upset victory was largely unexpected, throwing a proverbial wrench in the market's expectations for the election. Index futures initially plunged on the news as rising uncertainty fueled a risk off posture. Futures on the benchmark index initially fell 5.0%, triggering a trading halt.

The broader market was able to stabilize in the early morning as President-elect Trump helped calm investors. Mr. Trump indicated in his acceptance speech that the country must come together after a fractious election and relationships must be forged overseas. The President-elect also underscored that infrastructure spending will play a large role in his administration.

Equity indices showed marked resilience as the group erased marginal losses by mid-morning. Resilience in the broader market continued to stoke risk appetite as investors worked to price-in expectations of aggressive infrastructure spending and responded to a lower likelihood for price controls in the health care space.

The benchmark index ended near its best level of the day as seven sectors finished in positive territory. The heavyweight financial (+4.1%) and health care (+3.4%) sectors led the pack while industrials (+2.4%) and materials (+2.1%) also outperformed. On the other hand, rate-sensitive utilities (-3.7%) and real estate (-2.3%) finished with the largest losses.

The economically-sensitive financial sector (+4.1%) outperformed as rapid steepening in the yield curve bolstered the earnings prospects for banking names. The sub-group was also on the rise amid hopes for reduced regulations under a Trump administration. Dow components Goldman Sachs (GS 192.63, +10.71) and JPMorgan Chase (JPM 73.25, +3.22) finished higher by 5.9% and 4.6%, respectively.

Biotechnology and pharmaceutical names led in the health care sector (+3.4%) as the groups shrugged off recent concerns regarding potential drug pricing measures. The iShares Nasdaq Biotechnology ETF (IBB 284.99, +23.27) ended higher by 8.9% while Dow component Pfizer (PFE 32.12, +2.12, +7.1%) finished at the top of the price-weighted average. On the flipside, managed health care names were under pressure as participants speculated about a potential repeal of the Affordable Care Act by the next administration. Dow component UnitedHealth (UNH 141.90, -1.00) fell 0.7%, rounding out the index.

In the industrial sector (+2.4%), defense and machinery names displayed relative strength as investors expressed some optimism for potential infrastructure projects and defense spending. Lockheed Martin (LMT 253.46, +14.27) and Caterpillar (CAT 91.20, +6.52) rose 6.0% and 7.7%, respectively.

The energy sector gained 1.5% as crude oil snapped a recent losing streak. The energy component rose following a mixed inventory report from the Department of Energy. The EIA reported that crude oil inventories increased by 2.43 million barrels (consensus: +1.33 million) while gasoline stockpiles fell by 2.84 million barrels (consensus: -1.03 million). WTI crude finished higher by 0.6% ($45.20/bbl; +$0.25).

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 (0.90%) while the yield on the 10-yr note surged 22 basis points (2.08%).

Today's trading volume was above the average of 877 million as more than 1.39 billion shares changed hands at the NYSE floor.

Today's economic data was limited to the weekly MBA Mortgage Index and the Wholesale Inventory Report for September:

The MBA Mortgage Index indicated that mortgage applications fell 1.2% in the week ending November 5. This followed a 1.2% decline in the prior week.

Wholesale inventories increased 0.1% month-over-month in September (Briefing.com consensus +0.2%) following an upwardly revised 0.1% decline (from -0.2%) in August.

Wholesale sales were up 0.2% on the heels of an unrevised 0.7% increase in August.

Tomorrow's economic data will be limited to the 8:30 ET release of weekly initial claims (Briefing.com consensus 262k) and the 14:00 ET release of the October Treasury Budget. 

Russell 2000: +8.2% YTD

Dow Jones: +6.7% YTD

S&P 500: +5.8% YTD

Nasdaq Composite: +4.9% YTD