Day Traders Diary

1/24/17

 Slow and steady was the theme on Tuesday as the major averages opened flat and advanced throughout the duration of the session to close solidly higher. The Nasdaq (+0.9%) picked up steam in the afternoon to finish a step ahead of the S&P 500 (+0.7%), while the small-cap Russell 2000 (+1.7%) surpassed them all.

Investors replaced yesterday's cautious tone with a risk-on attitude. The change of heart was most obvious in the Treasury market, which lost all of Monday's gain as the 10-yr yield swung seven basis points higher to 2.47% after losing the same amount the day before. The U.S. dollar faced a similar dynamic, with the U.S. Dollar Index (100.34, +0.39) adding 0.4% after succumbing to selling pressure on Monday.

Generally speaking, investors traded Treasuries for stocks, but they were more specifically after growth-sensitive equities as all six cyclical sectors outpaced the broader market. Materials led all sectors with a 2.5% gain, setting the pace early following DuPont's (DD 76.05, +3.27) positive earnings report. The stock jumped 4.5% after the company beat earnings estimates and announced that its merger with Dow Chemical (DOW 59.64, +2.50) is expected to close in the first half of 2017.

A ways off from the materials sector was the financial space (+1.2%). The sector ended in second place after many of its top components recouped some of the losses suffered at the start of the earnings season. Technology, the only sector with more influence than financials, finished the day 1.0% higher after strength in chipmakers sent the PHLX Semiconductor Index higher by 2.0%. In the broader tech space, Yahoo! (YHOO 43.90, +1.50) was the most notable advancer after reporting favorable earnings results following yesterday's close.

Following the pro-cyclical narrative, energy added 1.0% on the back of crude oil's 0.8% advance. The commodity finished near this week's flat line, at $53.15/bbl, as reports pointing to lower production from top exporters offset an uptick in U.S. drilling.

On the non-cyclical side of the market, telecom services (-2.7%) finished the day at the bottom of the leaderboard following the disappointing earnings report from Verizon (VZ 50.12, -2.29), which also weighed on AT&T (T 41.36, -0.64). The two stocks account for a significant share of the lightly-weighted sector.

Health care (-0.7%) also finished in the red, while consumer staples bucked the trend, advancing 0.8%. The space's solid showing stemmed from an upbeat response to Kimberly Clark's (KMB 121.79, +4.81) better than expected earnings report. Sector heavyweights like like Procter & Gamble (PG 87.86, +0.90) and Coca-Cola (KO 41.90, +0.47) outperformed, adding close to 1.0% apiece.

Today's economic data was limited to December Existing Home Sales:

Existing home sales for December decreased 2.8% from November to an annualized rate of 5.49 million units while the Briefing.com consensus expected a reading of 5.55 million.

The key takeaway from the report is that inventory constraints, rising prices, and higher mortgage rates remain a key obstacle to stronger sales activity.

Tomorrow's economic data will include MBA Mortgage Applications Index at 7:00 am ET and November FHFA Housing Price Index at 9:00 am ET.

Russell 2000 +0.9% YTD

Dow Jones Industrial Average +0.8% YTD

S&P 500 +1.8% YTD

Nasdaq Composite +4.1% YTD