Day Traders Diary

11/23/16

 The stock market ended the pre-holiday affair on a flat note despite a deluge of economic data. The Dow Jones Industrial Average (+0.3%) finished ahead of the S&P 500 (+0.1%) and the Nasdaq Composite (-0.1%). It is also worth noting that the domestically-oriented Russell 2000 (+0.5%) extended its winning streak to a 14th consecutive session.

The major averages diverged at the start of the session as the heavily-weighted technology (-0.5%) and health care (+0.4%) spaces slipped down the sector leaderboard. Meanwhile, another rapid increase in market rates kept "yield play" groups --utilities (-0.9%), real estate (-0.7%), and consumer staples (-0.6%)-- under pressure.

Market rates were on the rise after the latest raft of economic data came in largely above consensus. The Durable Orders report signaled that headline orders jumped 4.8% (Briefing.com consensus 1.1%) while orders excluding transportation increased 1.0% (Briefing.com consensus 0.3%). The data marked the fourth consecutive month of growth, adding support to the rate hike argument.

The minutes from the Federal Open Market Committee's November meeting were also supportive of a rate hike in December. The minutes indicated that most committee members felt that it may soon be appropriate to raise the target range for the fed funds rate. Some FOMC members also argued that rates should be hiked at the December meeting to preserve the central bank's credibility. Per the CME's FedWatch Tool, the implied probability of an interest rate hike at the December meeting is unchanged at 93.5%.

The benchmark index settled just north of its flat line, marking another incremental record high. Seven sectors settled in positive territory with industrials (+0.8%), telecom services (+0.8%), and financials (+0.6%) leading the pack.

Heavy machinery names outperformed in the industrial sector (+0.8%). The group led after Deere (DE 102.17, +10.16, +11.0%) topped consensus estimates for the fourth quarter and issued upbeat sales guidance for the first quarter and full-year 2017. Peer and Dow component Caterpillar (CAT 96.18, +2.56m +2.7%) finished at the top of the price-weighted average. The broader sector has gained 8.7% so far this month.

The financial sector (+0.6%) continued its recent winning streak as banking names outperformed once again. The SPDR S&P Bank ETF (KBE 40.95, +0.22, +0.5%) has surged 18.1% in November on the back of steepening in the yield curve, which improves the earnings prospects for banks. The broader sector has gained 13.2% in November, leaving the group up 15.3% for 2016.

In the technology space (-0.5%), large cap tech names underperformed. Microsoft (MSFT 60.40, -0.72) and Alphabet (GOOG 760.99, -7.28) finished lower by 1.0% apiece. Meanwhile, HP (HPQ 14.87, -1.08) tumbled 6.8% after issuing cautious first-quarter guidance. However, the company did report in-line results for the fourth quarter.

The health care sector (+0.4%) finished in positive territory after biotechnology rebounded from steep opening losses. The iShares Nasdaq Biotechnology ETF (IBB 283.84, +2.48, +0.9%) sank 2.5% after Eli Lilly (LLY 68.00, -7.99, 10.5%) announced that its Alzheimer's drug, solanezumab, failed to reach the primary endpoints in its clinical trial.

Treasuries ended on a broadly lower note as yields jumped across the curve. The yield on the 2-yr note finished up four basis points at 1.13% while the yield on the benchmark 10-yr note also rose four basis points to 2.36%.

Today's trading volume was below the recent average of one billion as fewer than 808 million shares changed hands at the NYSE floor.

Today's economic data included the weekly MBA Mortgage Index, weekly initial claims, Durable Orders for October, the FHFA Housing Price Index for September, New Home Sales for October, and the University of Michigan Consumer Sentiment Survey for November:

The MBA Mortgage Index indicated that mortgage applications rose by 5.5% in the week ending November 19. This followed a 9.2% decline in the prior week.

Initial jobless claims increased by 18,000 for the week ending November 19 to 251,000 (Briefing.com consensus 243,000).

Continuing claims for the week ending November 12 increased by 66,000 to 2.043 million.

Durable orders for October surged past estimates, jumping 4.8% (Briefing.com consensus 1.1%), thanks to a 12.0% spike in transportation orders.

Excluding transportation, durable orders increased 1.0% in October (Briefing.com consensus 0.3%) on top of an unrevised 0.2% increase in September.

The FHFA Housing Price Index for September rose 0.6%, which followed an increase of 0.7% in August.

Sales of new single-family home sales declined 1.9% in October to a seasonally adjusted annual rate of 563,000 from a revised September rate of 574,000 (from 593,000).

The October reading was lower than the Briefing.com consensus estimate of 587,000.

The final reading of the University of Michigan Consumer Sentiment Survey for November increased to 93.8 (Briefing.com consensus 91.6) from the preliminary reading of 91.6.

The sentiment index jumped 8.2 points after the election, leaving the index 6.6 points above its level from October.

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

Tomorrow, bond and equity markets will be closed for Thanksgiving while Friday's session will end at 13:00 ET. Two pieces of economic data will be released Friday with October International Trade in Goods and October Advance Wholesale Inventories (Briefing.com consensus +0.2%) each crossing the wires at 8:30 ET.

Russell 2000: +18.1% YTD

Dow Jones: +9.5% YTD

S&P 500: +7.9% YTD

Nasdaq Composite: +7.5% YTD