Day Traders Diary

1/19/17

A wait-and-see attitude lingered throughout today's trading session, but the rubber will finally meet the road tomorrow when Donald Trump becomes the 45th President of the United States and gets a chance to deliver on promises that drove the stock market to a fresh record high. The S&P 500 and the Nasdaq closed lower by 0.4% and 0.3%, respectively.

The stock market enjoyed a huge post-election advance, rallying on the vision that Donald Trump promised his electorate; deregulation of the financial industry and increased infrastructure spending. But with over two months to price-in those hopes, investors haven't had much to do as of late but sit back and wait.

This notion has been most apparent in the financial sector (-0.6%), which has been weak despite a growing batch of better-than-expected earnings reports. But in the same breath, after the sector's huge 20.5% Q4 advance, earnings reports are more likely to invoke a "sell-the-news" response.

However, that's not to say the stock market hasn't had its opportunities to move, as the news flow has been steady. For instance, the European Central Bank announced its latest policy decision this morning. The market response was muted, however, as the ECB left rates and the stimulus program unchanged and ECB President Mario Draghi struck a dovish tone in his post-decision press conference. The euro slid in reaction to Mr. Draghi's remarks, but retraced that decline to end higher by 0.3% against the dollar at 1.0660.

Economic data also had its chance to move the market, but a better than expected Housing Starts report (1226K; Briefing.com consensus 1193K) could not prevent homebuilders from retreating. The iShares Dow Jones US Home Construction ETF (ITB 27.63, -0.32) lost 1.1%. Separately, initial claims and the Philadelphia Fed survey were met with a muted reaction.

Conversely, corporate news did have some market-moving impact, pushing the industrial sector (+0.6%) atop of the day's leaderboard. Railroads traded up after Union Pacific (UNP 106.24, +2.47) reported above-consensus earnings and Canadian Pacific (CP 150.31, +5.09) CEO Hunter Harrison left the company to pursue changes at CSX (CSX 45.51, +8.63). Shares of CSX spiked 23.4% after The Wall Street Journal reported Mr. Harrison will partner up with activist investor Paul Hilal.

At the opposite end of today's leaderboard were utilities (-0.9%) and real estate (-1.0%), suffering from an uptick in Treasury yields. Treasuries were in negative territory for the entire session, but the benchmark 10-yr yield retreated from its high by the close, ending higher by four basis points at 2.47%.

Energy (-0.7%) finished only slightly better, ignoring crude oil's modest gain. The commodity finished up 0.5% at $51.27/bbl despite the Energy Information Administration reporting that crude oil inventories had a build of 2.3 million barrels while the consensus called for a draw of 0.342 million barrels.

The top-weighted technology sector (-0.3%) also finished in the red, but ahead of the broader market. Consumer discretionary finished in a similar spot (-0.3%) despite an uptick from its largest component, Amazon (AMZN 809.04, +1.56). The sector was pulled down by retailers who sent the SPDR S&P 500 Retail ETF (XRT 43.52, -0.80) lower by 1.8% on continued weakness following disappointing holiday sales.

Today's economic data included Initial Claims, Housing Starts, and Philadelphia Fed Survey:

The latest weekly initial jobless claims count totaled 234,000 while the Briefing.com consensus expected a reading of 252,000. Today's tally was below the revised prior week count of 249,000 (from 247,000). As for continuing claims, they declined to 2.046 million from the revised count of 2.093 million (from 2.087 million).

The key takeaway from the report is that it will drive heightened expectations for nonfarm payroll growth in January as this claims report covers the period in which the household and establishment survey for the Employment Situation report are conducted.

Housing starts increased to a seasonally adjusted annualized rate of 1.226 million units in December, up from a revised 1.102 million units in November (from 1.09 million). The Briefing.com consensus expected starts to increase to 1.193 million units. Building permits decreased to a seasonally adjusted 1.210 million in December from an upwardly revised 1.212 million (from 1.201 million) for November. The Briefing.com consensus expected a reading of 1.217 million.

The key takeaway from the report is that residential construction will be computed as a positive input in Q4 GDP forecasts as the fourth quarter average for privately-owned housing units under construction was 1.8% above the third quarter average.

The Philadelphia Fed Survey for January rose to 23.6 from a revised 19.7 (from 21.5) while economists polled by Briefing.com had expected a reading of 15.3.

The key takeaway from the report is that it's a first quarter number and it suggests manufacturing activity in the Philadelphia Fed region expanded at an encouraging pace to begin the year.

Investors will not receive any economic data on Friday, allowing them to focus their attention on President-elect Trump's Inauguration at 12:00 ET.

Russell 2000 -0.8% YTD

Dow Jones Industrial Average -0.2% YTD

S&P 500 +1.1% YTD

Nasdaq Composite +3.0% YTD