Day Traders Diary

6/21/17

 The S&P 500 (-0.1%) bounced around its unchanged mark throughout the midweek session as the solid performances of the heavily-weighted health care (+1.2%) and technology (+0.7%) sectors helped keep the broader market's loss in check. The Dow (-0.3%) finished a tick behind the benchmark index while the tech-heavy Nasdaq (+0.7%) outperformed.

Biotechnology stocks were bullish once again on Wednesday, pushing the iShares Nasdaq Biotechnology ETF (IBB 316.10, +12.51) to its third-consecutive victory. Led by names like Incyte (INCY 133.99, +9.41), Celgene (CELG 132.83, +6.61), Vertex Pharmaceuticals (VRTX 134.83, +8.50), and Regeneron Pharmaceuticals (REGN 522.02, +26.69), the IBB climbed 4.1%, extending its week-to-date advance to 8.0%.

This week's positive performance within the biotech industry hasn't been driven by any hard news. However, there have been two factors that have helped fuel the bullish bias, namely an emerging sense that the government's attempt to rein in drug prices might not be as harmful as originally thought and buying momentum on a technical breakout from multi-month trading ranges.

Not surprisingly, the heavily-weighted health care sector (+1.2%) settled at the top of the day's leaderboard. The top-weighted technology sector (+0.7%) also finished solidly in the green amid broad strength. Adobe Systems (ADBE 144.24, +3.33) and Red Hat (RHT 98.58, +8.62) were among the top-performers in the technology group, adding 2.4% and 9.6%, respectively, after both companies reported better than expected earnings/revenues and issued upbeat guidance. Chipmakers also had a solid showing, evidenced by the 1.2% increase in the PHLX Semiconductor Index.

The consumer discretionary sector (+0.1%) was the only other group to finish ahead of the benchmark index. Reports that Nike (NKE 52.59, +1.03) and Amazon (AMZN 1002.23, +9.64) are discussing a possible direct sales relationship weighed on retailers like Foot Locker (FL 47.82, -2.51), which slipped 5.0%. The SPDR S&P Retail ETF (XRT 38.81, -0.51) settled lower by 1.3%, extending its month-to-date loss to 4.8%.

At the bottom of the leaderboard, the energy sector (-1.6%) settled in the red for the third-consecutive session as crude oil continued to slide, dropping 2.3% to $42.51/bbl. The energy component was flat in pre-market action and then moved modestly higher on headlines out of Iran suggesting the possibility of further OPEC production cuts. However, these headlines were later negated by some OPEC delegates.

The real kicker to trading sentiment was crude oil's inability to hold a positive bias following the weekly inventory report from the Department of Energy, which showed a draw of 2.5 million barrels from oil stockpiles and a 0.6 million barrel draw from gasoline inventories. The energy component held up relatively well immediately following the report, but then moved sharply lower around noon ET.

Like energy, the heavily-weighted financial sector (-0.8%) also finished solidly lower, suffering from broad weakness. Out of the remaining laggards, the telecom services (-1.2%) and materials (-1.1%) sectors were the weakest performers while the rest of the sectors finished with losses between 0.2% (real estate) and 0.7% (industrials).

In the bond market, Treasuries settled Wednesday's session relatively flat across the curve with the benchmark 10-yr yield closing unchanged at 2.16%.

Reviewing today's economic data, which included May Existing Home Sales and the weekly MBA Mortgage Applications Index:

Existing home sales for May increased 1.1% from April to an annualized rate of 5.62 million units while the Briefing.com consensus expected a reading of 5.52 million. The prior month's reading was revised to 5.56 million from 5.57 million.

The key takeaway from the report remains the same: existing home sales are being impeded by a lack of affordable supply, particularly in the lower- and mid-market price ranges.

The weekly MBA Mortgage Applications Index, which was released earlier this morning, rose 0.6% to follow last week's 2.8% increase.

On Thursday, investors will receive Initial Claims (Briefing.com consensus 240,000) and the April FHFA Housing Price Index at 8:30 ET and 9:00 ET, respectively.