Day Traders Diary

1/27/17

It appears that investors ran out of ink after rewriting the record book during Wednesday's session as the major averages closed the week relatively unchanged from those record levels. The S&P 500 (-0.1%) finished Friday's session just below its flat line, while the Nasdaq (+0.1%) performed just slightly better.

To illustrate the minimal change numerically, the five heaviest weighted sectors--technology, financials, health care, consumer discretionary, and industrials-- changed only marginally since Wednesday's close, seeing gains/losses of no more than 0.1%. Sectors like consumer staples and energy saw more substantial movement due to a number of factors, but generally, the stock market appears to be in wait-and-see mode, eyeing President Trump and his ability to implement the pro-growth agenda he ran his presidential campaign on.

However, despite minimal movement in the key indices, earnings season remained alive and well on Friday with technology names headlining the action. The results were mixed with Alphabet (GOOGL 845.03, -11.95) ticking down 1.4% in reaction to below-consensus earnings, while Intel (INTC 37.98, +0.42) and Microsoft (MSFT 65.78, +1.51) climbed 1.1% and 2.4%, respectively, after beating top and bottom line estimates.

The positives outweighed the negatives in the technology sector (+0.3%), which left the sector as one of the few spaces to close the day higher. Health care and telecom services were fortunate enough to do the same, adding 0.8% and 0.7%, respectively.

On the flip side, real estate (-0.9%) and energy (-0.9%) finished at the bottom of the day's leaderboard, with the latter fighting a battle on multiple fronts. The first attack against the energy space's came from Chevron (CVX 113.79, -2.76) after the company disappointed investors with its quarterly earnings report. Crude oil also weighed, slipping 1.1% to $53.18/bbl, as increased U.S. production overshadowed supply cut efforts by OPEC and non-OPEC members.

Consumer staples (-0.6%) also finished near the bottom of the leaderboard following a negative reaction to Colgate-Palmolive's (CL 64.68, -3.56) quarterly report. The company slipped 5.2% after missing revenue estimates and forecasting a low-single digit net sales increase for 2017.

For the week, cyclical sectors had the upper hand as materials (+3.4%) led five of the six spaces higher. Conversely, each countercyclical sector closed the week lower, with telecom services (-1.7%) falling the farthest.

U.S. Treasuries also closed Friday's session with a week-to-date loss. However, the Treasury market did end the week on an upbeat note, closing in positive territory around its highest levels of the day. The 10-yr yield settled two basis points lower at 2.48%.

Friday's economic data included advance fourth quarter GDP, December Durable Orders, and the final reading of the University of Michigan Sentiment Index for January:

Advance fourth quarter GDP pointed to an expansion of 1.9%, while the Briefing.com consensus expected a reading of 2.2%. The fourth quarter GDP Deflator came in at 2.1%, which is what the Briefing.com consensus expected.

The key takeaway from this report is that fourth quarter activity revealed the strong third quarter growth was as an aberration, yet that point aside, the salient takeaway for many is that this is a backward-looking report and the markets have their sights set on a brighter economic outlook for 2017, which is expected to feature deregulation, tax reform, and infrastructure spending among other items.

December durable goods orders declined 0.4%, while the Briefing.com consensus expected a 3.0% increase. The prior month's reading was revised to -4.8% (from -4.6%). Excluding transportation, durable orders rose 0.5% (Briefing.com consensus +0.5%) to follow the prior month's revised gain of 1.0% (from 0.5%).

The key takeaway from this report is that business investment remained on a positive trajectory.

The final reading of the University of Michigan Consumer Sentiment Index for January rose to 98.5 (Briefing.com consensus 98.0) from 98.1 in the preliminary reading.

The key takeaway from the report is that consumer confidence is rising on the back of an improved outlook for economic growth, job growth, and personal finances in the year ahead

Monday's economic data will include December Personal Income at 8:30 am ET and December Pending Home Sales at 10:00 am ET.

Nasdaq Composite 5.2% YTD

S&P 500 2.5% YTD

Dow Jones Industrial Average +1.7% YTD

Russell 2000 +1.0% YTD