Day Traders Diary

11/14/16

The stock market trades on a mostly lower note at midday as investors take some profits from the huge, post-election rally. The Nasdaq Composite (-0.5%) trades behind the S&P 500 (-0.2%) and the Dow Jones Industrial Average (-0.1%). The Russell 2000, however, remains up 0.9% after climbing 1.9% at the start of the session.

Equity indices began the day on a higher note as investors continued to re-position after last week's election. The Russell 2000 and the Dow Jones Industrial Average each carved out fresh all-time highs while the Nasdaq Composite struggled on continued weakness in large-cap tech names.

Rising market rates also continued in the early going. The Treasury complex trades lower across the board as investors express their angst about the inflation outlook in the wake of talk pointing to the likelihood of new fiscal stimulus being introduced soon. The yield on the benchmark 10-yr note remains up five basis points (2.20%). However, the 10-yr yield is down 10 basis points from the multi-month high it notched overnight.

The major averages have pulled back in recent action as investors assess the breadth of the post-election move. The heavily-weighted financial (+1.5%) and industrial (+0.5%) sectors remain the only two groups in positive territory. However, it is worth noting that the two were up 3.0% and 0.7% at the start of the day. On the flip side, technology (-1.8%) and energy (-0.8%) sit at the bottom of the sector leaderboard.

The influential technology space (-1.8%) displays relative weakness as large-cap tech names continue to pull back. Facebook (FB 115.47, -3.55) and Alphabet (GOOG 734.47, -19.55) are down 3.0% and 2.6%, respectively. Meanwhile, Dow component Apple (AAPL 105.33, -3.09) has fallen 2.9%. Apple remains pressured as investors contemplate potential negative implications for U.S. companies in the event of trade disputes with China under the Trump Administration.

In the financial sector (+1.5%), banking names outperform as a steepening yield curve improves the earnings prospects for the sector. The spread between the 2-yr (0.97%) and 10-yr note (2.20%) is up to 123 basis points from 98 basis points at the end of October. The S&P Bank ETF (KBE 39.67, +0.73) is up 1.9% while Dow component JPMorgan Chase (JPM 78.00, +2.12) is up 2.7%.

The energy sector (-0.8%) underperforms amid a continued downturn in crude oil futures. WTI crude trades lower by 2.1% ($42.50/bbl; -$0.91). The energy component has declined 9.3% since the end of October. Participants are expressing concerns over an ongoing supply overhang and misgivings regarding a previously discussed OPEC production cap agreement. OPEC ministers will be meeting in Vienna on November 30.

There was no economic data of note released today.