Day Traders Diary

11/17/16

 The stock market ended the Thursday affair on a modestly higher note as investors assessed the latest battery of economic data. The Nasdaq Composite (+0.7%) finished ahead of both the S&P 500 (+0.5%) and the Dow Jones Industrial Average (+0.2%).

Participants expanded their bets on an improving economy as increased inflation concerns had investors rotating out of the bond market in favor of more growth-oriented positions.

The Consumer Price Index (CPI) increased 0.4% (Briefing.com consensus +0.4%) in October while core CPI, which excludes food and energy, ticked up by 0.1% (Briefing. com consensus +0.2%). The data showed a firming inflation trend with the headline index rising to 1.6% year-over-year. Meanwhile, the core reading is up 2.1% year-over-year.

The latest housing data also helped pro-growth positioning as housing starts rose to an annualized rate of 1.323 million (Briefing.com consensus 1178k) in October. This will figure positively into fourth quarter GDP estimates and also marks the strongest reading since 2007. Building permits increased 0.3% to a seasonally adjusted rate of 1.229 million (Briefing.com consensus 1.200 million).

Federal Reserve Chair Janet Yellen highlighted recent economic growth when she stated that economic data since the November Fed meeting has been consistent with expectations. Chair Yellen also indicated that a policy rate increase may be appropriate relatively soon. According to the CME's FedWatch Tool, the implied probability of a December interest rate hike registers at 90.6%, unchanged from yesterday.

The tech-heavy Nasdaq (+0.7%; month-to-date: +2.8%) outperformed, narrowing this month's performance gap. The Dow Jones Industrial Average (+0.2%; month-to-date: +4.2%) and S&P 500 (+0.5%; month-to-date: +2.9%) ended closer to their flat lines. The modest advance in the benchmark index was underpinned by gains in six sectors.

The heavily-weighted financial (+1.3%), consumer discretionary (+1.2%), and technology (+0.7%) sectors led while real estate (-0.9%) and energy (-0.7%) underperformed.

The economically-sensitive financial sector (+1.3%) outperformed amid rising market rates and positive economic data. Banking names led the advance as steepening in the yield curve improved the industry's earnings potential. The SPDR S&P Bank ETF (KBE 40.17, +0.53) finished higher by 1.3%. Separately, Dow component JPMorgan Chase (JPM 78.02, +0.62, +0.8%) ended behind its peers after settling a hiring probe for approximately $265 million.

In the consumer discretionary space (+1.2%), homebuilders outperformed on the heels of the better-than-expected housing data. The iShares Dow Jones US Home Construction ETF (ITB 27.34, +0.57) rallied 2.1%. Meanwhile, electronics retailer Best Buy (BBY 45.99, +5.54) spiked 13.7% after topping consensus estimates for the quarter and issuing upbeat guidance for the fourth quarter.

The technology sector (+0.7%) continued playing catch up with the broader market. Dow component Microsoft (MSFT 60.64, +0.99) outperformed after an upgrade to "Buy" from "Neutral" at Goldman. Conversely, shares of Cisco Systems (CSCO 30.05, -1.52) fell 4.8% after the company issued some cautious guidance. The tech giant did, however, beat bottom-line estimates for the quarter.

The energy sector (-0.7%) ended on as lower note a crude oil surrendered an intraday gain, sliding into negative territory. WTI crude settled down 1.1% ($45.38/bbl; -$0.19).

The Treasury complex finished on a lower note with the long-end of the curve underperforming. The yield on the 2-yr note finished higher by two basis points (1.03%) while the yield on the benchmark 10-yr note rose six basis points to 2.29%.

Today's trading volume was below the average of 895 million as fewer than 831 million shares changed hands at the NYSE floor.

Today's economic data included CPI for October, October Housing Starts and Building Permits, weekly initial claims, and the Philadelphia Fed Survey for November:

CPI increased 0.4%, as expected, in October while core CPI, which excludes food and energy, rose 0.1% (Briefing.com consensus +0.2%).

On a year-over-year basis, total CPI is up 1.6% -- its largest 12-month increase since October 2014 -- and core CPI is up 2.1%

October housing starts surged 25.5% to a seasonally adjusted annual rate of 1.323 million (Briefing.com consensus 1.178 million).

Building permits rose 0.3% to a seasonally adjusted annual rate of 1.229 million (Briefing.com consensus 1.200 million)

Initial claims for the week ending November 12 dropped by 19,000 to 235,000 (Briefing.com consensus 258,000).

Continuing claims decreased by 66,000 to 1.977 million, which is the lowest level since April 15, 2000.

The Philadelphia Fed Index dipped to 7.6 in November (Briefing.com consensus 8.5) from 9.7 in October, although the new orders index ticked up to 18.6 from 16.3.

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

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