Day Traders Diary

1/30/17

Investors decided to err on the side of caution to open a week full of earnings reports and influential economic data. The S&P 500 finished the day lower by 0.6%, while the Nasdaq (-0.8%) closed just a tick below the benchmark index.

Equity indices faced broad-based selling pressure from the start of Monday's session, with many fingers pointing to President Trump's executive order, which suspended the U.S. refugee program and temporarily restricted nationals of seven countries--Iran, Iraq, Libya, Somalia, Sudan, Syria, and Yemen--from entering the United States, as the driver of the bearish tone.

It is a defensible position, as that order has engendered some concerns about protectionism taking root and has detracted from the market's preferred policy focus of corporate tax reform, but the market will face a full event calendar this week, so some caution is warranted.

The Federal Reserve will release its latest policy statement on Wednesday, which, combined with Friday's release of the January Employment Situation report (Briefing.com consensus 170K), could build a case for a rate hike at the subsequent FOMC meeting. In addition, a full slate of quarterly reports awaits with Apple (AAPL 121.63, -0.32) scheduled to release its results after Tuesday's closing bell.

Today's risk-off tone was most apparent in the stock market while Treasuries finished the day little changed with the benchmark 10-yr yield remaining at 2.48%. The U.S. Dollar Index finished just below its flat line with a loss of 0.1%, masking the dollar's 1.2% decline against the Japanese yen (113.73). It is worth noting the Bank of Japan will release its latest policy statement overnight.

Nine of eleven spaces finished the day in negative territory. Countercyclical sectors populated the upper half of Monday's leaderboard, with consumer staples (+0.1%) eking out a slim gain. The consumer discretionary sector (-0.1%) was the best performer on the cyclical side, finishing just a tick from its flat line. Walt Disney (DIS 110.94, +1.64) underpinned the sector's performance, adding 1.5%, after the company's stock was upgraded to 'Overweight' from 'Equal-Weight' at Morgan Stanley.

The energy sector occupied the bottom spot on the leaderboard, finishing 1.8% lower after pressure on multiple fronts. On the earnings side, Enterprise Products' (EPD 28.45, -0.64) mixed earnings report was met with a downbeat response, pushing the company's stock lower by 2.2%. Crude oil also hurt the energy space, closing its trading day 1.1% lower at $52.62/bbl.

The top-weighted technology sector (-0.8%) finished a tick lower than the benchmark index with top components like Alphabet (GOOGL 823.83, -21.20), Microsoft (MSFT 65.13, -0.65), and Facebook (FB 130.98, -1.20) falling between 0.9% and 2.5%.

Today's economic data included December Personal Income/Spending and December Pending Home Sales:

December personal income rose 0.3% while the Briefing.com consensus expected an increase of 0.4%. Meanwhile, December personal spending increased 0.5% while the Briefing.com consensus expected a reading of 0.4%. The November Personal Spending reading was left unrevised at 0.2% while November Personal Income was revised to 0.1% from 0.0%. Core PCE prices for December rose 0.1% (Briefing.com consensus 0.2%), while the November reading was left unrevised at 0.0%.

With spending rising faster than income, the drop in the personal savings rate suggests consumers were spending out of savings -- something that wouldn't typically be done unless it was out of necessity or consumers were feeling better about their income prospects.

Pending Home Sales for December rose 1.6% while the Briefing.com consensus expected an increase of 1.3%. Today's reading follows a 2.5% downtick in November.

Tomorrow's economic data will include the fourth quarter Employment Cost Index (Briefing.com consensus 0.6%) at 8:30 am ET, the November S&P Case Schiller Home Price Index (Briefing.com consensus 5.0%) at 9:00 am ET, January Chicago PMI (Briefing.com consensus 55.0) at 9:45 am ET, and January Consumer Confidence (Briefing.com consensus 112.5) at 10:00 am ET.

Russell 2000 -0.3% YTD

Dow Jones Industrial Average +1.1% YTD

S&P 500 1.9% YTD

Nasdaq Composite 4.3% YTD