Day Traders Diary

12/13/16

The stock market followed its Monday downtick with a Tuesday surge that lifted the key indices to new record highs. The S&P 500 gained 0.7% while the Nasdaq (+1.0%) outperformed ahead of tomorrow's FOMC policy statement, which will be released at 14:00 ET and is expected to call for a 25-basis point rate hike.

With the market believing that a rate hike will be announced tomorrow for all the right economic reasons, equity indices were free to continue their climb to stratospheric heights. However, the Russell 2000 (UNCH) spent the day near its flat line, suggesting the small cap rally may be running out of steam. The Russell 2000 narrowed its post-election gain to 14.9% versus a 6.2% gain in the S&P 500.

All eleven sectors began the trading day in the green with most maintaining that posture into the close while materials (-0.2%) and industrials (-0.1%) recorded slim losses.

The energy sector (+1.3%) ended in the lead while crude oil added 0.4% to settle at $52.98/bbl. The energy component received another measure of support on top of the weekend non-OPEC production cut agreement, as the International Energy Agency raised its oil demand forecast for 2017.

Energy spent the day jockeying for position with the technology sector (+1.2%). The top-weighted tech space spiked at the start thanks to gains among some of its largest components like Apple (AAPL 115.19, +1.89), Microsoft (MSFT 62.98, +0.81), and Facebook (FB 120.31, +2.54). Chipmakers also took part in the rally, sending the PHLX Semiconductor Index higher by 1.1%.

The market saw some afternoon backtracking, but daylong strength in other influential sectors like health care (+0.7%) and consumer discretionary (+0.8%) kept the S&P 500 in the top half of today's trading range. The health care sector received some support from biotech names, evidenced by a 0.6% gain in the iShares Nasdaq Biotechnology ETF (IBB 269.05, +1.52). Alexion Pharmaceuticals (ALXN 110.01, -5.07), however, fell 4.4% on top of yesterday's 12.9% dive.

Elsewhere, the industrial sector (-0.1%) underperformed throughout the day while the Dow Jones Transportation Average (+0.3%) was limited to a slight uptick, which masked a 4.2% jump in the shares of JetBlue Airways (JBLU 22.53, +0.91) after the carrier issued upbeat guidance.

Treasuries saw gains in overnight action, but the 10-yr note returned to its flat line by the close. The benchmark yield settled at 2.47% while the 2-yr yield rose two basis points to 1.17%. The long bond ended higher, pressuring its yield two basis points to 3.14%.

Today's participation was above average as more than one billion shares changed hands at the NYSE floor.

Investors received just one economic report today. Import prices excluding oil decreased 0.1% in November after declining 0.1% last month while export prices excluding agriculture also declined 0.1% after increasing 0.2% in October.

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while November Retail Sales (Briefing.com consensus 0.3%) and November PPI (Briefing.com consensus 0.1%) will cross the wires at 8:30 ET. November Industrial Production (Briefing.com consensus -0.1%) and Capacity Utilization (Briefing.com consensus 75.1%) will be reported at 9:15 ET while October Business Inventories (Briefing.com consensus -0.1%) will be released at 10:00 ET.

• Russell 2000 +20.9% YTD
• Dow Jones Industrial Average +14.3% YTD
• S&P 500 +11.1% YTD
• Nasdaq Composite +9.1% YTD