Day Traders Diary

1/5/17

 The stock market finished Thursday just below its flat line as the S&P 500 shed 0.1%. The Nasdaq outperformed, adding a modest 0.2%.

Stocks were abe to overlook the red flags in other markets during the opening hour, but selling interest picked up soon thereafter. The S&P 500 saw a ten-point dip in the late morning amid defensive action in other asset classes. However, the slip, which came ahead of tomorrow's release of the Employment Situation Report for December (Briefing.com consensus 175K), was largely erased by the close.

Cyclical sectors performed slightly worse than their defensive counterparts, as five of the six finished in negative territory. Leading the retreat was the financial sector (-1.0%), which broke its three-session winning streak. Industrials (-0.4%), materials (-0.3%), and energy (-0.3%) also trailed the broader market.

Energy had a poor showing despite crude oil ending the day up 0.9% at $53.87/bbl. The advance occurred as the U.S. dollar retreated for the second consecutive day. The U.S. Dollar Index (101.52, -0.97) finished lower by 1.0%, thanks to strength in the euro (1.0593) and the Japanese yen (115.61). The two currencies increased 1.0% and 1.4% against the dollar, respectively.

The consumer discretionary space (-0.1%) settled in line with the broader market, bouncing back from heavy selling pressure in the morning. The sector started Thursday on the wrong foot after Macy's (M 30.86, -4.98) and Kohl's (KSS 42.01, -9.87) issued disappointing guidance due to weak holiday sales, pushing the SPDR S&P 500 Retail ETF (XRT 44.02, -1.15) lower by 2.6%. However, the sector's top-weighted stock, Amazon (AMZN 780.45, +23.27) had a solid showing, ending the day higher by 3.1%.

The top-weighted technology sector (+0.2%) was the only cyclical group to finish the day in positive territory. However, the win didn't come easy as weakness in chipmakers sent the PHLX Semiconductor Index lower by 0.9%. That soft spot was offset by gains in top components like Apple (AAPL 116.61, +0.59) and Facebook (FB 120.67, +1.98).

On the countercyclical side, health care (+0.5%) finished the day at the top of the leaderboard by capitalizing on biotechnology's positive performance; the iShares Nasdaq Biotechnology ETF (IBB 278.10, +0.87) added 0.3%. Real estate (+0.5%), consumer staples (+0.3%), and utilities (+0.1%) also finished in the green, drawing strength from a decline in yields.

U.S. Treasuries climbed into the late morning and returned to their highs just ahead of the close. The benchmark 10-yr yield fell seven basis points to 2.37%.

Economic data included ADP Employment Change, Initial Claims, and ISM Services:

The latest weekly initial jobless claims count totaled 235,000 while the Briefing.com consensus expected a reading of 265,000. Today's tally was below the revised prior week count of 263,000 (from 265,000). As for continuing claims, they rose to 2.112 million from the revised count of 2.096 million (from 2.102 million).

The key takeaway from the report is that it points to tight labor market conditions as employers overall appear to be reluctant to cut staff.

The ADP National Employment Report showed an increase of 153,000 in December (Briefing.com consensus 170,000) while the November reading was revised lower to 215,000 from 216,000. The ADP reading precedes Friday's more influential Employment Situation Report for December, which the Briefing.com consensus expects will show the addition of 175,000 nonfarm payrolls. The Employment Situation Report for November indicated that nonfarm payrolls increased by 178,000.

The ISM Services Index for December held at 57.2 while the Briefing.com consensus expected a downtick to 56.6.

The key takeaway from the report is that respondents' comments were mostly positive about business conditions and the overall economy, reinforcing the market's belief that the U.S. economy, which is driven predominately by the non-manufacturing sector, was exhibiting some encouraging growth characteristics as 2016 came to an end.

For further detail on today's economic releases, be sure to visit Briefing.com's Economic Calendar

Tomorrow, the Employment Situation report for December (Briefing.com consensus 175K) and November Trade Balance (Briefing.com consensus -$42.20 billion) will be reported at 8:30 ET while November Factory Orders (Briefing.com consensus -2.1%) will cross the wires at 10:00 ET.

Nasdaq Composite +2.0% YTD

S&P 500 +1.4% YTD

Russell 2000 +1.1% YTD

Dow Jones Industrial Average +0.7% YTD