Day Traders Diary


The stock market rebounded from Wednesday's broad-based weakness, but the key indices slipped on an oil slick ahead of the close. The S&P 500 added 0.5% after being up as much as 1.5% intraday to narrow this week's decline to 1.9%.

The Thursday rebound likely included a short covering element as the key indices rallied through the first hour and respected narrow ranges into the afternoon. However, selling into the close pressured the indices from their highs.

Investors received a pre-market confidence boost from a better than expected Retail Sales report and a larger than expected decline in weekly initial claims. In turn, the data helped the Dollar Index (88.59, +0.33) rebound from three consecutive declines. However, the dollar strength wasn't entirely due to economic data as the greenback entered the morning with a solid overnight gain against the yen. The dollar/yen pair climbed to 119.00 (+1.1%), and retraced most of its decline from Wednesday.

The dollar strength acted as a drag on crude oil, which could not hold its overnight gain. Instead, the energy component spent the bulk of the day near its flat line before sliding to its morning low into the pit close to settle lower by 1.6% at $60.02/bbl.

Meanwhile, the energy sector (unch) spiked into the lead at the start, but could not remain in that spot through the late-afternoon decline in crude oil. Similarly, the broader market retreated during the final two hours as crude slid to a new low for the day.

Crude oil's inability to sustain a rebound brought up concerns about the prospect of margin calls, debt repayment capabilities, a global economic slowdown, and just about anything else one can dream up in a negative causality relationship. We're not saying all of that was valid, only that it was enough in the back of the market's mind to keep participants fixated on oil price dynamics as a market mover.

Outside of energy, three of the remaining five cyclical sectors ended in-line with or ahead of the broader market. The consumer discretionary sector (+0.7%) enjoyed broad support from homebuilders and retailers. The iShares Dow Jones US Home Construction ETF (ITB 24.90, +0.12) and SPDR S&P Retail ETF (XRT 91.71, +1.17) gained 0.5% and 1.3%, respectively.

Elsewhere, the technology sector (+0.5%) was underpinned by large cap components like Facebook (FB 77.72, +1.54), Google (GOOGL 532.15, +4.11), and Microsoft (MSFT 47.15, +0.25). The trio gained between 0.5% and 2.0% while high-beta chipmakers also contributed to the advance with the PHLX Semiconductor Index adding 0.5%.

Also of note, the industrials (+0.5%) kept pace with the market which masked relative strength among transport stocks. The Dow Jones Transportation Average added 0.8%.

Over on the countercyclical side, consumer staples (+0.8%), telecom services (+0.6%), and utilities (+1.0%) settled ahead of the broader market while the health care sector (+0.3%) underperformed.

Treasuries slumped in the morning, but recovered the bulk of those losses during the afternoon. The 10-yr yield ticked up one basis point to 2.18%.

Participation was a little ahead of average with 805 million shares changing hands at the NYSE floor.

Economic data included initial claims, retail sales, import/export prices, and business inventories:

The initial claims level fell to 294,000 from an unrevised 297,000 while the consensus expected a decline to 295,000
Over the past few months, the initial claims level has stabilized below 300,000. There is nothing in the data that suggests claims will move out of this range in the near term
Retail sales increased 0.7% in November after increasing an upwardly revised 0.5% (from 0.3%) while the consensus expected an increase of 0.4%
This month's retail sales report was set up for a positive surprise from the start. According to the November employment report, aggregate wages accelerated and increased 0.9% after increasing just 0.3% in October. With the savings rate already at elevated levels relative to current debt payment needs, there was no reason why households would hold on to a large portion of the income gain instead of spending it
Export prices, excluding agriculture, decreased 1.2% in November after decreasing 0.9% in the prior reading
Excluding oil, import prices ticked down 0.2%, which followed last month's 0.2% decline
Business inventories increased 0.2% in October after increasing an unrevised 0.3% in September while the consensus expected an increase of 0.2%
The changes in inventories for manufacturers (0.1%) and merchant wholesalers (0.4%) were known prior to the release. The only piece of new information was that retailer inventories increased 0.2% for a second consecutive month in October
A 0.7% increase at both building materials dealers and clothing stores offset a 0.7% decline at furniture stores and a 0.5% decline at general merchandise stores
Tomorrow, November PPI ( consensus -0.1%) will be released at 8:30 ET while the preliminary reading of the December Michigan Sentiment Survey will be reported at 9:55 ET (consensus 89.5).

Nasdaq Composite +12.7% YTD
S&P 500 +10.1% YTD
Dow Jones Industrial Average +6.2% YTD
Russell 2000 +0.2% YTD

All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.