Day Traders Diary

7/6/17

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Equity indices are solidly lower at midday with the S&P 500 showing a loss of 0.5%. However, on a positive note, the benchmark index found support at its 50-day moving average (2,414) after testing it in the opening minutes. The Nasdaq (-0.5%) and the Dow (-0.4%) trade roughly in line with the benchmark index and all three averages hover in the upper half of today's trading range.

Government bond yields are higher around the globe today with U.S. Treasuries moving in a curve-steepening trade; the 10-yr yield is up five basis points at 2.38% while the 2-yr yield is just one basis point higher at 1.42%. The increased 2yr-10yr spread, which currently sits at a six-week high, has underpinned the heavily-weighted financial sector (+0.1%) throughout today's session.

The financial group has exhibited relative strength since the opening bell and is currently the only sector to trade in the green. The lightly-weighted materials group hovers at its unchanged mark, but the nine remaining sectors hold losses between 0.3% (consumer staples) and 1.7% (telecom services).

Chipmakers are outperforming, evidenced by the 0.1% increase in the PHLX Semiconductor Index, but most of the technology sector's (-0.4%) components are trading in the red. The tech group was trading as low as -1.2% early this morning, but the semiconductor industry's positive performance helped the group move back in line with the broader market.

The influential health care sector (-1.0%) is one of the weakest groups with just about all of its components trading in negative territory. Biotechnology names exhibit relative weakness with the iShares Nasdaq Biotechnology ETF (IBB 311.27, -3.97) showing a loss of 1.3%.

WTI crude futures are trading solidly higher today, up 2.6% at $46.28/bbl, after the Department of Energy reported that oil inventories declined by 6.3 million barrels last week, while the consensus expected a draw of just 2.0 million barrels. Gasoline stocks also declined more than expected, dropping 3.7 million barrels vs the consensus estimate of -1.8 million barrels.

However, the energy sector (-1.0%) has struggled despite crude oil's positive performance. The sector moved sharply higher immediately following the EIA release, but has since given back nearly all of the spike.

It's also worth noting that today's trading volume has been relatively light thus far as many investors remain on vacation following the Fourth of July holiday weekend.

Reviewing today's batch economic data, which included June ADP Employment Change, the weekly Initial Claims Report, June ISM Services, May Trade Balance, the weekly MBA Mortgage Applications Index, and June Challenger Job Cuts:

The ADP National Employment Report showed an increase of 158,000 in June (Briefing.com consensus 185,000) while the May reading was revised lower to 230,000 from 253,000.

The ADP reading precedes Friday's more influential Employment Situation Report for June, which the Briefing.com consensus expects will show the addition of 173,000 nonfarm payrolls.

The latest weekly initial jobless claims count totaled 248,000 while the Briefing.com consensus expected a reading of 244,000. Today's tally was above the unrevised prior week count of 244,000. As for continuing claims, they rose to 1.956 million from the revised count of 1.945 million (from 1.948 million).

The key takeaway from the report is that jobless claims continue to remain at low levels that are consistent with a tight labor market.

The ISM Services Index for June rose to 57.4 from an unrevised reading of 56.9 in May. The Briefing.com consensus expected a reading of 56.6.

The key takeaway from the report is that the services side of the economy continues to perform well, evidenced by every index component registering a reading above 50.0 in June.

The May trade balance showed a deficit of $46.5 billion while the Briefing.com consensus expected the deficit to hit $46.1 billion. The previous month's deficit was left unrevised at $47.6 billion.

The key takeaway from the report is that the average real trade balance for the second quarter is higher than the average for the first quarter, which implies net exports will have a negative contribution on Q2 GDP growth.

The weekly MBA Mortgage Applications Index rose 1.4% to follow last week's 6.2% decrease.

June Challenger Job Cuts showed a year-over-year decrease of 19.3% to follow last month's year-over-year increase of 9.7%.