Day Traders Diary

6/8/17

Equities have ticked up a bit in recent action, but overall, the first half of Thursday's session has been flat and range-bound as investors have focused their attention on Washington, where former FBI Director James Comey just finished testifying before the Senate Intelligence Committee. The Dow (+0.3%) trades a step ahead of the Nasdaq (+0.2%) and the S&P 500 (+0.2%) while the small-cap Russell 2000 has done even better, jumping 1.3%.

Investors are still digesting Mr. Comey's testimony, but, thus far, the stock market has appeared somewhat heartened by the understanding that the testimony hasn't painted the president in a distinctly criminal light. When asked if he thought President Trump was trying to obstruct justice when he told Mr. Comey that he hoped he could let go of the investigation of former National Security Adviser Michael Flynn, Mr. Comey responded that it wasn't for him to say and he would let others make that determination.

In addition to Mr. Comey's testimony, European headlines have been on investors' minds today. The European Central Bank decided to leave interest rates unchanged this morning, as expected, however, the central bank did drop language from its policy statement that suggested rates could be cut further. In addition, ECB President Mario Draghi acknowledged that risks to the outlook are now broadly balanced, but noted that inflation remains low and has yet to show a convincing pickup. The euro (1.1213) ticked down a bit following the news and currently trades 0.4% lower against the U.S. dollar.

Meanwhile, the pound (1.2940) is down 0.2% against the greenback as investors await the results of today's general election in the UK. The Conservatives are expected to come away victorious, but polls conducted in recent weeks suggested a narrower margin of victory than previously expected.

Back in the U.S., the financial sector (+1.6%) has put together a positive performance again today after leading the stock market to its first win of the week on Wednesday. The sector's strength is broad-based with banks, insurers, asset managers, and consumer finance companies up across the board. For the week, the financial group hovers at the top of the leaderboard, by a wide margin, with a week-to-date gain of 2.1%.

In general, cyclical sectors have outperformed their countercyclical peers today as a modest risk-on tone is present in the equity market and elsewhere. For instance, in the bond market, U.S. Treasuries trade lower across the curve with the benchmark 10-yr yield climbing three basis points to 2.20%. Gold has also experienced notable selling pressure, dropping 1.0% to $1,279.91/ozt.

Outside of financials, the top-performing growth oriented sectors have been industrials (+0.4%) and materials (+0.5%), but the technology sector's (+0.1%) modest advance is maybe even more notable given its weight on the broader market. Chipmakers have helped underpin the tech sector, pushing the PHLX Semiconductor Index higher by 1.1%, after NVIDIA's (NVDA 157.77, +8.68) target price was raised to $180 from $145 at Citigroup. NVDA shares are up 6.0%.

On the countercyclical side, the health care sector (-0.1%) lags despite the biotechnology industry's positive performance; the iShares Nasdaq Biotechnology ETF (IBB 294.60, +1.62) is up 0.6%. Meanwhile, the remaining defensive-oriented groups show losses between 0.4% (telecom services) and 1.2% (utilities).

On the data front, investors received only one economic report--the weekly Initial Claims Report--on Thursday:

The latest weekly initial jobless claims count totaled 245,000 while the Briefing.com consensus expected a reading of 240,000. Today's tally was below the revised prior week count of 255,000 (from 248,000). As for continuing claims, they declined to 1.917 million from the revised count of 1.919 million (from 1.915 million).

The key takeaway from the report is that the level of initial claims remains consistent with a tight labor market.