Day Traders Diary

3/16/17

Wednesday's bullish momentum lingered at the opening bell on Thursday, but the energy faded fast as investors came up short on reasons to extend the stock market's record high level. The S&P 500 and the Dow closed with losses of 0.2% and 0.1%, respectively, while the Nasdaq finished flat.

News from Washington did little to encourage the notion that tax reform will be a quick and easy process; President Trump's proposed budget was met with resistance and three House Republicans voted against the GOP health care bill in a committee vote, casting doubt on the legislation's chances on the floor of the House.

Crude oil also played into the cautious tone as the energy component failed to sustain yesterday's positive momentum, squandering a solid pre-market gain. WTI crude finished the day just above its flat line at $48.75/bbl while the energy sector (-0.6%) closed solidly lower.

Biotechnology names weighed on the health care space (-0.9%) after Biogen (BIIB 278.96, -13.68) shares were downgraded at both Morgan Stanley and Leerink Partners on Thursday morning. The company lost 4.7% while the iShares Nasdaq Biotechnology ETF (IBB 298.61, -3.78) tumbled 1.2%.

The rate-sensitive utilities sector (1.1%) fell all the way to the bottom of the day's leaderboard as selling pressure in the Treasury market left yields modestly higher; the benchmark 10-yr yield increased by four basis points to 2.54%.

Most of the remaining sectors finished lower, including industrials (-0.4%), materials (-0.6%), telecom services (-0.3%), and real estate (-0.3%). However, the financials and technology sectors, which together comprise around 35.0% of the broader market, offset most of the negative influence with gains of 0.3% and 0.2%, respectively.

The technology sector centered its advance around Oracle's (ORCL 45.73, +2.68) latest earnings report in which the company reported better than expected earnings, issued upbeat guidance, and increased its dividend. On the other hand, the financial sector's uptick was likely a belated response to yesterday's rate hike. Since the FOMC announcement, investors heard from the Bank of Japan, Swiss National Bank, and the Bank of England. All three held pat, underscoring the Fed's hawkish tilt when compared to other central banks.

The consumer discretionary (+0.1%) and consumer staples (+0.1%) sectors also performed relatively well, finishing just above their flat lines as retailers showed strength; the SPDR S&P Retail ETF (XRT 42.43, +0.13) closed higher by 0.3%. Homebuilders also helped the consumer discretionary sector, evidenced by the 1.9% increase in the iShares U.S. Home Construction ETF (ITB 32.52, +0.59). The strength followed the release of the February Housing Starts report, which came in roughly as expected.

In addition to Housing Starts, Thursday also saw Initial Claims, March Philadelphia Fed, and January JOLTS:

Housing starts increased to a seasonally adjusted annualized rate of 1.288 million units in February, up from a revised 1.251 million units in January (from 1.246 million). The Briefing.com consensus expected starts to increase to 1.260 million units. Building permits decreased to a seasonally adjusted 1.213 million in February from a revised 1.293 million (from 1.285 million) for January. The Briefing.com consensus expected a reading of 1.251 million.

The key takeaway from the report is that there was strength in the single-family sector for both starts and permits. Single-family starts increased 6.5% to 872,000 while single-family permits increased 3.1% to 832,000.

The latest weekly initial jobless claims count totaled 241,000 while the Briefing.com consensus expected a reading of 242,000. Today's tally was below the unrevised prior week count of 243,000. As for continuing claims, they declined to 2.030 million from the revised count of 2.060 million (from 2.058 million).

The key takeaway from this report is that initial claims continue to run at low levels that point to the likelihood of healthy nonfarm payroll gains in the Employment Situation Report for March.

The Philadelphia Fed Survey for March declined to 32.8 from an unrevised 43.3 in February while economists polled by Briefing.com had expected a reading of 25.0.

The key takeaway from the report is that the index has increased for eight consecutive months and remains comfortably above the 0.0 dividing line between expansion and contraction.

The January Job Openings and Labor Turnover Survey showed that job openings increased to 5.626 million from a revised 5.539 million (from 5.501 million) in December.

On Friday, investors will receive February Industrial Production (Briefing.com consensus 0.2%) at 9:15 ET, while February Leading Indicators (Briefing.com consensus 0.5%) and the University of Michigan Sentiment Index for March (Briefing.com consensus 96.8) will cross the wires at 10:00 ET.

Nasdaq Composite +9.6% YTD

S&P 500 +6.4% YTD

Dow Jones Industrial Average +5.9% YTD

Russell 2000 +2.1% YTD