Day Traders Diary

4/17/17

 The financial sector (+1.6%), and the broader market, opened the week with a nice bounce-back performance as participants returned in a buying frame of mind following the extended Easter weekend. The S&P 500 (+0.9%) finished in-line with the Dow (+0.9%) and the Nasdaq (+0.9%) and closed at its high for the session.

While geopolitical uncertainty continues to loom, especially with the French presidential election on the horizon, investors were encouraged by the relatively quiet weekend, which saw no major disruptions on the geopolitical front. The positive sentiment led to gains at the start of Monday's session, but the financial sector's solid performance was that really solidified the day's bullish tone.

Participants had an eye on bank stocks after JPMorgan Chase (JPM 85.86, +1.46) and Citigroup (C 58.99, +0.95) sold off last Thursday despite reporting better than expected earnings and revenues.  That selling occurred incidentally amid a good bit of geopolitical headline angst in front of the weekend. JPM and C got back in gear today, though, and reclaimed all of Thursday's losses, which sent a bullish signal to the broader market ahead of earnings reports from Bank of America (BAC 22.81, +0.47) and Goldman Sachs (GS 226.26, +2.94) before Tuesday's open.

The financial space was also aided by the activity in the Treasury market, which produced a modest steepening of the yield curve that is beneficial for banks' net interest margins.  The 10-yr yield (2.25%) added two basis points while the 2-yr yield (1.19%) decreased by one basis point. Paired with the decrease in the CBOE Volatility Index (14.65, -1.31, -8.2%), the slip in the 10-yr Treasury note offered further evidence of the risk-on sentiment that prevailed in the cash market on Monday.

Most of the financial sector's cyclical peers outperformed the broader market, including the technology (+1.0%), industrials (+1.0%), consumer discretionary (+1.0%), and real estate (+1.2%) sectors. Chipmakers had a hand in the tech group's solid showing. The PHLX Semiconductor Index finished higher by 1.3%.

Crude oil prices dropped 1.1% to finish the day at $52.63/bbl and contributed to the energy sector's (+0.2%) underperformance. The commodity's slip was attributed to profit-taking efforts in light of its recent three-week rally.

On the countercyclical side, the health care sector (+0.3%) struggled to keep pace as Eli Lilly (LLY 82.38, -3.50) and Incyte (INCY 126.07, -14.77) weighed on the space. The two companies slipped 4.1% and 10.5%, respectively, in reaction to the FDA's decision on Friday to deny the companies' rheumatoid arthritis drug Baricitinib. The iShares Nasdaq Biotechnology ETF (IBB 290.58, -0.01) settled at its flat line.

European markets were closed for Easter Monday, but that didn't stop the euro (1.0641) and the pound (1.2565) from adding 0.3% apiece against the U.S. dollar. As a result, the U.S. Dollar Index (100.23, -0.26) finished Monday's session lower by 0.3%.

On the data front, investors received several economic reports, including April Empire State Manufacturing Survey, April NAHB Housing Market Index, and April Net Long-Term TIC Flows:

The Empire Manufacturing Survey for April declined to 5.2 from the prior month's reading of 16.4. The Briefing.com consensus estimate was pegged at 13.0.

The NAHB Housing Market Index for April declined to 68 (Briefing.com consensus 70) from an unrevised reading of 71 in March.

Net Long-Term TIC Flows for April were $53.4 billion versus a revised $5.9 billion (from $6.3 billion) for March.

On Tuesday, investors will receive the March Housing Starts (Briefing.com consensus 1.256 million) and March Industrial Production (Briefing.com consensus 0.4%) reports. The two reports will cross the wires at 8:30 ET and 9:15 ET, respectively.

Nasdaq Composite +8.8% YTD

S&P 500 +4.9% YTD

Dow Jones Industrial Average +4.4% YTD

Russell 2000 +0.3% YTD