Day Traders Diary

3/8/17

The bulls and the bears slugged it out on Thursday until the energy sector (+0.6%) gave the bulls a slight edge in the final stretch. The S&P 500 finished with a slim 0.1% gain while the Nasdaq and the Dow closed flat. Meanwhile, the Russell 2000 underperformed, posting a loss of 0.4%.

Crude oil followed up its 5.3% Wednesday plunge with another disappointing performance on Thursday as investors continued to digest yesterday's bearish EIA reading. The energy component closed its trading day 2.1% lower at $49.24/bbl, but regained a good portion of that loss in electronic trade. The energy sector appreciated the belated effort, leading the late afternoon rally and finishing near the top of the day's leaderboard after holding the bottom spot for much of Thursday's action.

One of the reasons energy stocks rebounded so sharply in the afternoon session is that few people expected it given the continued drop in oil prices. The weakness in crude oil likely spurred some participants to short the energy stocks, so when they started to exhibit relative strength, weak-handed short sellers likely got nervous, covered their positions, and effectively aided in the sector's recovery effort.

Outside of the energy world, the European Central Bank (ECB) captured investors' attention for a while this morning with its latest policy decision to leave rates unchanged. More notably, the ECB raised its 2017 GDP forecast to 1.8% from 1.7%, but did not suggest an impending reduction to stimulus. This gave a boost to the euro, helping the currency climb 0.4% against the dollar to 1.0587.

Back in the U.S., the health care sector (+0.6%) finished with the energy group at the top of the day's leaderboard. Similarly, the financial (+0.3%), consumer staples (+0.2%), and telecom services (+0.4%) sectors also outperformed the broader market.

The financial sector held the top spot on the day's leaderboard going into afternoon action, but comments from White House Press Secretary Sean Spicer were met with some backtracking in bank stocks. During today's press briefing, Mr. Spicer said that President Donald Trump remains committed to restoring the Glass-Steagall Act.

On the flip side, the lightly-weighted real estate group (-1.3%) finished at the bottom of the sector standings while the industrials (-0.5%) and materials (-0.4%) groups also finished solidly lower.

The consumer discretionary space (unch) closed just below the broader market as retailers pushed the SPDR S&P Retail ETF (XRT 41.83, -0.54) lower by 1.3%. Despite its small market cap, Tailored Brands (TLRD 15.84, -7.53), the parent company of Men's Wearhouse and Jos. A. Bank, contributed to the bearish sentiment among retailers after the company missed top and bottom line estimates and issued downbeat guidance. TLRD shares sank 32.2%.

In the Treasury market, U.S. sovereign debt finished Thursday's session lower as investors eyed tomorrow's Employment Situation Report, which is regarded as the last potential barrier to a March rate hike. The benchmark 10-yr yield finished four basis points higher at 2.60%.

Today's economic data included February Export/Import Prices and Initial Claims:

Import prices excluding oil rose 0.3% in February after ticking down 0.1% in January (revised from -0.2%). Export prices excluding agriculture increased 0.3% in February after rising 0.2% in January (revised from +0.1%).

The key takeaway from the report is that it won't alter the market's newfound belief that the Fed is likely to raise the target range for the fed funds rate at its March meeting since there are evident signs of increasing inflation in the year-over-year readings for both import and export prices.

The latest weekly initial jobless claims count totaled 243,000 while the Briefing.com consensus expected a reading of 240,000. Today's tally was above the unrevised prior week count of 223,000. As for continuing claims, they declined to 2.058 million from the revised count of 2.064 million (from 2.066 million).

Despite the jump in initial claims, which was not influenced by any special factors, the key takeaway from the report is that there was no discernible change in the long-term trend in initial claims, which held below 300,000 for the 105th straight week.

Tomorrow's economic data will include the Employment Situation Report for February (Briefing.com consensus 188,000), which will be released tomorrow at 8:30 ET while the February Treasury Budget will follow at 14:00 ET.

Nasdaq Composite +8.5% YTD

S&P 500 +5.6% YTD

Dow Jones Industrial Average +5.5% YTD

Russell 2000 +0.2% YTD