Day Traders Diary

11/11/12

The stock market ended an extremely strong week on a fairly solid note as the post-election rally effort was maintained for the most part. The S&P 500 slipped just 0.1% while the Dow Jones Industrial Average ended with a gain of 0.2%. The two indices locked in respective weekly advances of 3.8% and 5.4%. The Russell 2000 (+2.4%), however, managed to extend its weekly gain to an impressive 10.2%.

The major averages rallied in the prior two sessions as investors rapidly re-positioned to account for the expected pro-growth policies of a Trump Administration. Mr. Trump is expected to advance a reduction in regulations, lower tax rates, and fiscal stimulus through large infrastructure projects. That combination resulted in heavy positioning in the financial (+0.4%), industrial (+0.3%), and materials (-1.7%) sectors throughout the week.

Conversely, increased inflation concerns and fiscal stimulus expectations drove investors out of the Treasury market and defensively-oriented positions.

The S&P 500 (-0.1%) finished modestly lower on some otherwise light profit-taking from a huge move that was highlighted by an 11.3% gain for the financial sector, the vast majority of which came after the election.  Six sectors lost ground on Friday.

The health care sector (-1.5%) displayed relative weakness as pharmaceutical and biotechnology names narrowed their weekly gains. Those groups had been on the rise as investors dialed back fears that they might face drug pricing legislation. The iShares Nasdaq Biotechnology ETF (IBB 288.00, -1.78) finished lower by 1.1%, but ended the week up 14.4%. The broader health care sector rose 5.8% this week.

Banking names continued to outperform in the financial sector (+0.4%) as the S&P Bank ETF (KBE 38.94, +0.71) jumped 1.9%. Bank stocks benefited handsomely this week from a steepening yield curve and talk the Trump Administration is looking at dismantling a good chunk, if not all, of Dodd-Frank.

In the consumer discretionary space (+0.6%), Dow component Disney (DIS 97.68, +2.72, +2.9%) finished at the top of the price-weighted average as some upbeat guidance for the company's ESPN division overshadowed weaker-than-expected quarterly results. On the flip side, mixed results from the retail sub-group kept the sector in check. Michael Kors (KORS 49.70, -2.06) finished down 4.0% after missing top- and bottom-line estimates for the quarter and lowering its third quarter and full year outlook.

The high-beta chipmakers outperformed, evidenced by the 3.9% gain in the PHLX Semiconductor Index. NVIDIA (NVDA 87.97, +20.20, +29.8%) led the group after beating consensus estimates for the quarter and issuing upbeat guidance. The company also increased its buyback and quarterly dividend.

Bonds sold off in recent days as the yield on the benchmark 10-yr note jumped 38 basis points from last Friday's settlement to 2.15%. There was no action in the Treasury market today, however, as the bond market was closed in observance of Veterans Day.

There was plenty of action in the oil pit.  Crude futures settled 2.8% lower at $43.39 per barrel, facing ongoing pressure from concerns about excess supply and a strengthening dollar.  Crude futures settled the week 1.5% lower.

Today's trading volume at the NYSE was above the average of 914 million as more than 1.1 billion shares changed hands at the NYSE floor.

Today's economic data was limited to the University of Michigan Consumer Sentiment Index for November:

The University of Michigan's Index of Consumer Sentiment for November increased to 91.6 (Briefing.com consensus 87.9) from the final reading of 87.2 for October.

That was the highest reading since mid 2016, although it won't be taken at face value since the data were compiled before the election result was known.

There is no economic data of note scheduled to be released on Monday.

Russell 2000: +12.8% YTD

Dow Jones: +8.2% YTD

S&P 500: +5.9% YTD

Nasdaq Composite: +4.6% YTD