Day Traders Diary

2/22/17

 Investors have navigated a wave of information in the first half of Thursday's session with caution, leaving the benchmark S&P 500 index flat at midday. The Dow (+0.2%) outperforms while the Nasdaq (-0.5%) and the small-cap Russell 2000 (-0.9%) hold solid losses.

The Nasdaq has taken a blow from chipmakers today with NVIDIA (NVDA 101.35, -9.45) leading the retreat. The company has plunged 8.6% after analysts from both BMO Capital and Instinet downgraded NVDA shares this morning. The PHLX Semiconductor Index trades lower by 1.5%.

Biotech names have also weighed on the Nasdaq, evidenced by the 0.7% decrease in the iShares Nasdaq Biotechnology ETF (IBB 288.21, -2.10). The IBB is in danger of posting its third consecutive loss.

Still, despite a disappointing showing from the biotech industry, the health care space (+0.6%) outperforms the benchmark index thanks to broad strength in the sector's components. Health care's countercyclical peers also trade in the green with consumer staples, utilities, telecom services, and real estate holding gains between 0.4% and 1.3%.

On the cyclical side, the top-weighted technology sector holds a loss of 0.3%. Like chipmakers, Apple (AAPL 136.66, -0.44) has weighed on the sector, trading lower by 0.3%.

Consumer discretionary (-0.4%) also holds a modest loss after negative reactions following a batch of earnings reports. Tesla (TSLA 260.06, -13.44) has dropped 4.9% after reporting a wider than expected loss per share. However, on a positive note, the company did announce that the Model 3 is on track for initial production in July.

Retailers reported mixed results, but the SPDR S&P 500 Retail ETF (XRT 43.72, -0.41) trades lower by 0.9% after L Brands' (LB 49.08, -9.02) below-consensus guidance overshadowed better than expected earnings. The company has plummeted 15.8%.

Industrials (-0.7%) hold the bottom spot on today's leaderboard. The sector's components show broad weakness amid growing speculation of a potential delay in the implementation of the Trump administration's infrastructure plan. Likewise, the materials sector trades lower by 0.3%.

Energy (+0.5%) is the only cyclical space to trade in the green thanks to crude oil's solid showing. The commodity held a big gain early this morning following yesterday's API reading, which showed a draw of 0.884 million barrels vs. last week's build of 9.941 million barrels, but crude oil gave back some of that gain after today's EIA crude inventory report.

The EIA crude inventory report came in better than expected, showing a build of 0.6 million barrels while the consensus called for a build of about 3.475 million barrels. However, in light of yesterday's bullish API reading, the upbeat EIA report was not enough to justify all of crude oil's big morning advance. The energy component still holds a solid gain of 1.4% and trades at $54.33/bbl.

Treasuries hold modest gains ahead of comments from Dallas Fed President Kaplan (FOMC voter), who will speak today at 1:00 pm ET. The benchmark 10-yr yield is lower by three basis points at 2.39%.

Today's economic data included Initial Claims and December FHFA Housing Price Index:

The latest weekly initial jobless claims count totaled 244,000 while the Briefing.com consensus expected a reading of 242,000. Today's tally was above the revised prior week count of 238,000 (from 239,000). As for continuing claims, they declined to 2.060 million from the revised count of 2.077 million (from 2.076 million).

The key takeaway from this report is that it covers the period in which the survey for the February Employment Situation report was conducted, and given the low level of claims, it will likely feed a belief that nonfarm payrolls are apt to increase by 200,000+ again.

The FHFA Housing Price Index for December rose 0.4%, which followed a revised increase of 0.7% in November (from 0.5%). The reading was in line with Briefing.com consensus (+0.4%).

The key takeaway from the report is that high prices and limited inventory continue to compress the affordability factor for prospective buyers, and have prevented existing home sales from being even stronger.