Day Traders Diary

2/8/16

The major averages finished Wednesday's session flat, but mixed as the S&P 500 (+0.1%) and the Nasdaq (+0.2%) closed with modest gains while the Dow (-0.2%) underperformed.

In a day short on economic data, earnings reports made the biggest splash with a slew of companies reporting their quarterly results between yesterday's close and today's open. Some of the biggest post-report movers came from the tech sector (+0.2%) with Cognizant Technology (CTSH 56.45, +2.66) and Microchip Technology (MCHP 73.80, +4.18) adding 5.0% and 6.0%, respectively. CTSH reported better than expected earnings and issued positive first quarter guidance, while MCHP beat on both top and bottom lines in addition to issuing upbeat guidance. 

The consumer discretionary sector (+0.6%) was also well represented on the earnings front. Walt Disney (DIS 109.01, +0.01) finished flat after better than expected earnings were balanced with a miss on revenues. Meanwhile, mid-cap Panera Bread (PNRA 232.90, +18.63) spiked 8.7%, fueled by better than expected earnings as well as a 3.0% increase in fourth quarter comparable net bakery-cafe sales.

The energy space (-0.1%) finished just shy of its flat line as an uptick in crude oil pushed the sector up from a larger loss. The commodity finished 0.3% higher at $52.36/bbl after holding solid losses during the overnight session and into the morning. The Energy Information Administration (EIA) data showed a huge 13.8 million barrel build in oil inventories, which confirmed yesterday's bearish reading from the API. Crude oil climbed despite the inventory readings, likely due to some short positions being squeezed out.

On the countercyclical side, a 8.6% decline in Gilead Sciences (GILD 66.83, -6.30) held the health care space (-0.1%) below its flat line. Gilead reported better than expected results, but negative guidance for 2017 overshadowed the company's earnings. A positive earnings report and above-consensus guidance from Allergan (AGN 241.17, +8.56) helped alleviate some of health care's loss, but wasn't enough to prevent the space from being the only defensive sector to close in the red.

Lightly-weighted real estate (+0.9%) and utilities (+0.9%) closed at the top of the day's leaderboard, while financials (-0.8%) finished at the bottom. The financial space experienced broad pressure from its components as investors engaged in some profit taking in light of the space's huge fourth quarter advance and the stock market's recent stall.

The financial space also faced some headwinds in the Treasury market as the yield curve ended the day slightly flatter. U.S. Treasuries had a fairly volatile session, jumping to session highs amid a modest decrease in rate hike expectations. The fed funds futures market is still pointing to June as the most likely window for the next rate hike, but the implied likelihood of a June hike declined to 58.4% from 64.7%.

Treasuries squandered half of their gains following a poorly received $23 billion 10-yr auction. The benchmark 10-yr yield closed four basis points lower at 2.35% while the 2-yr yield finished down two basis points at 1.15%.

Today's lone economic report, the weekly MBA Mortgage Index, increased 2.3% to follow last week's 3.2% decline.

On Thursday, investors will receive Initial Claims (Briefing.com consensus 250,000) at 8:30 am ET and December Wholesale Inventories (Briefing.com consensus 1.0%) at 10:00 am ET.

• Nasdaq Composite +5.6% YTD
• S&P 500 +2.5% YTD
• Dow Jones Industrial Average +1.5% YTD
• Russell 2000 +0.1% YTD