Day Traders Diary

3/2/17

The major averages took a dip on Thursday as they cooled off from their red hot Wednesday performance. The S&P 500 finished the day 0.6% lower.  The Dow (-0.5%) performed slightly better and the Nasdaq (-0.7%) closed a tad behind.  The Russell 2000 (-1.3%), meanwhile, suffered the largest loss after leading Wednesday's broad-based rally.

Similarly, the financial sector (-1.4%), which led all S&P 500 sectors on Wednesday, took the biggest hit on Thursday, giving back over half of Wednesday's impressive 2.8% gain.  In light of the sector's huge 24.1% post-election advance, however, today's downtick was still relatively modest.

The materials (-1.1%) and industrials (-1.0%) sectors also had a rough showing.  The latter sector was weighed down by Caterpillar's (CAT 94.36, -4.22) 4.3% tumble. CAT shares slipped after reports that some of the company's facilities have been searched by federal agents.

The energy sector (-0.9%) also failed to keep pace with the benchmark index as crude oil prices slid 2.3%. The energy component finished Thursday at $52.61/bbl following reports that Russia failed to meet its pledged production cuts in the month of February.

This latest news came on the heels of yesterday's Energy Information Administration report, which showed a crude oil stock build of 1.5 million barrels that pushed U.S. crude oil inventories to a record high.

The consumer discretionary sector (-0.2%) also closed in negative territory, but just barely, as the earnings front provided the sector with a solid backstop. Retailers rallied, evidenced by the 1.1% increase in the SPDR S&P 500 Retail ETF (XRT 43.34, +0.45), after a generally positive reaction to a wave of earnings reports.

The consumer staples sector (unch) also received a bump from the earnings front after Monster Beverage (MNST 47.37, +5.36) spiked 12.8% in reaction to its better than expected revenues and strong sales growth. The sector's countercyclical peers --health care (-0.2%), telecom services (+0.1%), and utilities (+0.7%)-- also outperformed with utilities finishing at the top of today's leaderboard.

Like equities, U.S. Treasuries finished Thursday in negative territory as a March rate hike from the Federal Reserve appears more and more likely. The Treasury market remained weak after Fed Governor Brainard said following Wednesday's close that it will be "appropriate soon" for the U.S. central bank to raise interest rates.

Treasuries extended their losses slightly during the morning session after Fed Governor Powell supported Ms. Brainard's hawkish comments, saying the case for a March rate hike has "come together."

In addition, the latest weekly Initial Claims report came in hotter than expected, showing the lowest reading for initial claims (223,000) since March 31, 1973.

The fed funds futures market is now assigning an implied probability of 79.7% to a March rate hike, up from 66.4% yesterday and from only 26.6% last Friday.

Also of note, Snap (SNAP $24.48, +7.48) launched its much anticipated IPO on Thursday. The social media company had an IPO price of $17.00 per share, but opened for trading late on Thursday morning at $24.00 per share before ending the session at $24.48.

Today's only notable economic report was Initial Jobless Claims:

The latest weekly initial jobless claims count totaled 223,000 while the Briefing.com consensus expected a reading of 244,000. Today's tally was below the prior week's count of 242,000 (revised from 244,000). As for continuing claims, they rose to 2.066 million from the revised count of 2.063 million (from 2.060 million).

The key takeaway from the report -- aside from the fact that initial claims are at a 44-year low -- is that it will help underpin the growing belief in the prospect of the Federal Reserve raising the target range for the federal funds rate at its March 14-15 FOMC meeting.

Tomorrow's lone economic report, ISM Services (Briefing.com consensus 56.5%), will cross the wires at 10:00 ET.

Nasdaq Composite +8.9% YTD

S&P 500 +6.4% YTD

Dow Jones Industrial Average +6.3% YTD

Russell 2000 +2.8% YTD