Day Traders Diary

4/13/17

 The stock market wrapped up the abbreviated week with its third consecutive loss as investors refused to be swayed by a handful of bullish catalysts. The major averages settled at the lower end of the day's trading range with the tech-heavy Nasdaq (-0.5%) finishing just a step ahead of the S&P 500 (-0.7%) and the Dow (-0.7%) as the technology sector (-0.4%) outperformed. For the week, the S&P 500 lost 1.1%.

JPMorgan Chase (JPM 84.40, -1.00), Citigroup (C 58.04, -0.47), and Wells Fargo (WFC 51.35, -1.77) kicked off the earnings season on Thursday morning with some better than expected results. All three companies beat earnings expectations, but differed on their top line results; JPM and C beat revenue estimates while WFC missed its mark. Investors thought about rallying around the upbeat reports, pushing JPMorgan Chase and Citigroup 2.0% higher in early action, but the gains did not last.

In the end, the financial sector (-1.3%) finished the day solidly lower, but it was not the worst performing sector. The distinction is worth pointing out, considering the fact that the financial group has been an influential force since the presidential election, consistently leading the broader market higher and lower.

The energy sector (-1.9%) did finish at the bottom of the day's standings. The energy space typically moves in tandem with crude oil, but that wasn't the case today as the commodity eked out a slim 0.1% gain. WTI crude settled at $53.18/bbl, ending the week higher by 1.8%.

On a positive note, the biotechnology industry was a diamond in the rough, evidenced by the 0.7% increase in the iShares Nasdaq Biotechnology ETF (IBB 290.59, +1.94). The solid performance gave the health care sector an edge while the technology group's strength stemmed from a solid performance from large-cap names like Facebook (FB 139.39, -0.19) and Alphabet (GOOGL 840.18, -1.28).

In the bond market, Treasuries closed mostly flat despite the sell-off in equities. The 10-yr Treasury note did manage to eke out a slim gain, leaving its yield one basis point lower at 2.23%. For its part, gold settled 0.8% higher at $1,288.60/ozt.

Investor participation was a bit below average again today with only 912.1 million shares changing hands at the NYSE floor (50-day moving average: 1.07 billion).

On the data front, March PPI, Initial Claims, and the April Michigan Consumer Sentiment Survey all came in better than expected, but, like the positive earnings reports, investors ignored the upbeat results:

March producer prices decreased 0.1%, which is below the Briefing.com consensus of 0.0%. Core producer prices where unchanged while the Briefing.com consensus expected an increase of 0.2%.

The key takeaway from the report is that the downturn in final demand prices in March wasn't just a function of a downturn in energy prices.

The latest weekly initial jobless claims count totaled 234,000 while the Briefing.com consensus expected a reading of 251,000. Today's tally was below the revised prior week count of 235,000 (from 234,000). As for continuing claims, they declined to 2.028 million from the revised count of 2.035 million (from 2.028 million).

The key takeaway from the report is that the initial claims data once again served as a reflection of a tightening labor market.

The preliminary reading of the University of Michigan Consumer Sentiment Index for April rose to 98.0 (Briefing.com consensus 96.3) from 96.9 in March.

The key takeaway from the report is that consumers are feeling very good about current economic conditions, evidenced by the Current Economic Conditions Index rising to its highest level since 2000 and nearly reaching the all-time peak of 121.1 set in 1999.

The stock market will be closed tomorrow in observance of Good Friday, but investors will still receive some notable economic reports. Both March CPI (Briefing.com consensus 0.0%) and March Retail Sales (Briefing.com consensus -0.1%) will cross the wires at 8:30 ET while February Business Inventories (Briefing.com consensus 0.3%) will be released later in the morning at 10:00 ET.

On Monday, participants will receive April Empire Manufacturing at 8:30 ET, the April NAHB Housing Price Index at 10:00 ET, and April Net Long-Term TIC Flows at 16:00 ET.

Nasdaq Composite +7.8% YTD

S&P 500 +4.0% YTD

Dow Jones Industrial Average +3.5% YTD

Russell 2000 -0.9% YTD

Week in Review: Caution Persists

Last week's headlines kept on giving as investors displayed caution in light of the ongoing situations in Syria and North Korea. The S&P 500 ended the week with a loss of 1.1%, but, more notably, the benchmark index finished the week below its 50-day moving average (2352).

North Korea took center stage at the beginning of the week after the U.S. Navy ordered the Carl Vinson Strike group towards the Korean Peninsula. This prompted rumors of Chinese troop movement along the North Korean border, but these claims were later refuted by China's Defense Ministry.

President Trump added some fuel to the fire on Tuesday morning, tweeting that he would like China's help in diffusing the North Korean situation, but the U.S. is willing to solve the problem on its own. However, through all the noise, the S&P 500 was flat through the first two days of the week as its 50-day moving average provided a measure of support.

North Korea will celebrate the birth anniversary of founder Kim Il-sung on April 15 and there is speculation that another nuclear test could be conducted that day.

The conflict in Syria took precedence on Wednesday as U.S. Secretary of State Rex Tillerson made a stop in Moscow. Mr. Tillerson met with Russian President Vladimir Putin, despite earlier reports that the U.S. diplomat would not have access to the Russian president, but conversations were reportedly heated. Nonetheless, the two countries agreed to establish a working group to iron out their issues.

Investors shifted their focus back to the home front on Thursday with JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) kicking off the earnings season. All three companies reported better than expected earnings, but were mixed when it came to revenues; JPM and C beat top line estimates while WFC fell short. However, the banks were unable to capitalize on the upbeat reports, which acted as a discouraging signal to the broader market.

If one thing can be said for sure after reflecting on this week's activity, it's that investors are becoming more skeptical about the future, evidenced by the CBOE Volatility Index (VIX 15.67, -0.10), which increased three points for the week. The VIX index now sits at its highest level since the presidential election.

The lingering geopolitical issues led to a notable dip in rate hike expectations. The fed funds futures market ended the week pointing to a 57.3% implied probability of a June hike, down from last week's 70.6%.