Day Traders Diary

1/13/17

The major averages finished Friday's session mixed. The S&P 500 (+0.2%) and the Nasdaq (+0.5%) closed in the green, while the Dow (unch) finished in the red.

Investors had high hopes for today's earnings reports, looking for banks to validate the financial sector's 20.5% Q4 advance. What they received wasn't great, yet it wasn't all that bad either as Bank of America (BAC 23.01, +0.09), JPMorgan Chase (JPM 86.70, +0.46), and Wells Fargo (WFC 55.31, +0.81) came up short on revenue. Wells Fargo also missed bottom-line expectations while Bank of America and JPMorgan beat their respective earnings estimates.

Investors chose to run with the good news, pushing the financial sector, and the market, upward out of the gate. However, profit taking in the financial sector pressured the influential group off its high, leading to a sideways drift in the broader market as the session wore on. Bank of America (+0.4%), JPMorgan Chase (+0.5%), and Wells Fargo (+1.5%) finished off their session highs, but still outpaced the broader market. Similarly, the financial sector (+0.6%) ended atop the leaderboard, but only kept a portion of its opening gain.

Most cyclical sectors outperformed with consumer discretionary (+0.3%), industrials (+0.3%), and technology (+0.3%) closing in positive territory. The top-weighted technology sector had a mixed showing from its top components as Apple (AAPL 119.04, -0.21) lost 0.2% while Facebook (FB 128.34, +1.72) climbed 1.4%. On the other hand, chipmakers finished overwhelmingly in the green, with Qualcomm (QCOM 66.88, +0.76) pacing the advance. The PHLX Semiconductor Index closed higher by 0.7%.

On the countercyclical side, health care (+0.1%) outpaced its defensive peers. The space leaned on biotechnology to counter losses from large cap components like UnitedHealth (UNH 161.80, -0.56) and Bristol-Myers Squibb (BMY 56.22, -0.33) which lost 0.3% and 0.6%, respectively. The iShares Nasdaq Biotechnology ETF (IBB 280.01, +1.08) countered with a 0.4% gain. The remaining four countercyclical sectors finished just below their flat lines in negative territory.

For the week, the cyclical, non-cyclical trend continued as four of the six growth-sensitive sectors posted week-to-date gains. Comparatively, all five countercyclical sectors finished the week lower. The ends of the leaderboard were represented by consumer discretionary (+0.8%) at the top, riding a 0.7% week-to-date gain in the SPDR S&P 500 Retail ETF (XRT 44.01, +0.04), and real estate (-2.3%) at the bottom.

U.S. Treasuries were under moderate selling pressure early, sustaining losses immediately following the opening bell. The Treasury market recouped some of the loss, but still closed in negative territory with the 10-yr yield higher by two basis points at 2.39%.

Today's economic data included PPI, Retail Sales, Business Inventories, and the Michigan Sentiment Index:

December producer prices increased 0.3%, which is in line with the Briefing.com consensus. Core producer prices increased 0.2% while the Briefing.com consensus expected an increase of 0.1%.

The key takeaway from the report is that higher energy prices are driving up producer prices and continue to support the notion that inflation rates are apt to pick up in 2017.

December retail sales increased 0.6%, which compares to the Briefing.com consensus of 0.7%. The prior month's reading was revised higher to 0.2% from 0.1%. Excluding autos, retail sales rose 0.2% while the consensus expected an uptick of 0.6%. The prior month's reading was revised higher to 0.3% from 0.2%.

The key takeaway from the report is that consumers were somewhat guarded with their discretionary spending on goods in December despite some decent wage growth and reports of increased confidence.

Business Inventories rose 0.7% in November while the Briefing.com consensus expected an uptick of 0.6%. The prior month's reading was revised to -0.1% from -0.2%.

The key takeaway from the report is that business inventories continue to remain at an elevated level relative to sales, which will continue to weigh on pricing power.

The preliminary reading of the Michigan Consumer Sentiment Index for January declined to 98.1 (Briefing.com consensus 98.5) from 98.2 in December.

The key takeaway from the report is that there is a real divide between positive and negative concerns among consumers pertaining to the Trump Administration. However, when the outlook from consumers who didn't share any views on government is considered, the Expectations Index was a strong 90.9. The latter, according to the report, supports a real consumption growth rate of 2.7% in 2017.

The stock market will be closed on Monday, January 16 in observance of Martin Luther King Jr. Day. The next economic report will be January Empire Manufacturing (Briefing.com consensus 8.3), which will be released on Tuesday morning at 8:30 am ET.

Russell 2000 +1.1% YTD

Dow Jones Industrial Average +0.6% YTD

S&P 500 +1.6% YTD

Nasdaq Composite +3.6% YTD