Day Traders Diary


The major averages continued their rough week with the S&P 500 (-0.9%) registering its fifth consecutive decline after failing to hold the 100-day moving average (2007). The price-weighted Dow Jones Industrial Average (-0.6%) fared a bit better while the Nasdaq Composite (-1.5%) and Russell 2000 (-1.7%) underperformed.


This morning, market participants were greeted by an astounding move in the foreign exchange market. Specifically, the Swiss franc was up as much as 25.0% against the dollar after the Swiss National Bank abandoned the EURCHF 1.20 floor and lowered the benchmark deposit rate to -0.75%. The move was likely taken in anticipation of a QE announcement from the ECB, and the dollar/franc pair was able to narrow its loss to 15.0% (0.8687); however, that was still large enough to resonate with investors who were lulled into a false sense of security by the SNB's pledge to maintain the exchange rate floor.


Equity indices began the day with slim gains, but the morning strength faded alongside crude oil, which slid from a session high at $51.00/bbl to $46.57/bbl. The energy component ended the day lower by 4.1%, but that masked the fact that crude fell almost 9.0% from its best level of the day. Furthermore, that pullback was closely correlated with a broad-market slide, which was paced by cyclical sectors.


The two top-weighted groups—technology (-1.5%) and financials (-1.3%)—spent the day at the bottom of the leaderboard and their underperformance prevented the market from staging a notable rebound. Most large cap tech components held up relatively well, but Apple (AAPL 106.86, -2.94) fell 2.7% after Mizuho downgraded the stock to 'Neutral' from 'Buy.' Similarly, high-beta social media names lagged with the likes of Facebook (FB 74.05, -2.23), LinkedIn (LNKD 213.21, -6.22), and Yelp (YELP 50.12, -2.08) falling between 2.8% and 4.0%. Chipmakers also struggled, but the PHLX Semiconductor Index (-0.8%) ended ahead of the broader market thanks to an 8.7% surge in Taiwan Semiconductor (TSM 22.89, +1.83) after the company beat earnings estimates and issued upbeat guidance.


Elsewhere, the financial sector retreated under the weight of two more quarterly reports that missed their mark. Citigroup (C 47.23, -1.82) reported below-consensus earnings and revenue while Bank of America (BAC 15.20, -0.84) delivered a one-cent beat on light revenue. The two names posted respective losses of 3.7% and 5.2% while the sector extended its January decline to 6.1%.


Also of note, the consumer discretionary sector (-1.3%) finished among the laggards as retailers and homebuilders struggled. The SPDR S&P Retail ETF (XRT 92.12, -2.16) lost 2.3% while iShares Dow Jones US Home Construction ETF (ITB 24.60, -1.30) fell 5.0% despite better than expected earnings from Lennar (LEN 42.48, -3.28). The stock fell 7.2% after company management made cautious comments about its outlook, echoing the remarks made earlier this week by KB Home (KBH 12.39, -1.15).


On the upside, consumer staples (+0.2%) and utilities (+0.7%) posted gains while another countercyclical sector—health care (-1.1%)—was pressured by biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 307.70, -7.87) lost 2.5%, which contributed to the underperformance of the Nasdaq.


Treasuries registered solid gains with the 10-yr yield sliding nine basis points to 1.76%.


Today's participation was ahead of average with more than 850 million shares changing hands at the NYSE floor.


Economic data included Initial Claims, PPI, Empire Manufacturing, and the Philadelphia Fed Survey:


The initial claims level increased to 316,000 from an upwardly revised 297,000 (from 294,000) while the consensus expected a drop to 290,000 

That was the largest initial claims level since the beginning of June 2014 when 318,000 claims were filed

It is possible that the rise in claims is the beginning of an upward move in layoff levels from energy-related activities. Low oil prices are expected to cause layoffs as fracking becomes uneconomical

Producer prices declined 0.3% in December after declining 0.2% in November while the consensus expected a decline of 0.4% 

Total energy prices fell 6.6% in December, which was the sixth consecutive month of price declines

Excluding food and energy, core PPI increased 0.3% in December after being flat in November. The consensus expected an uptick of 0.1%

The Empire Manufacturing Survey for January registered a reading of 9.9, which was above the prior month's reading of -1.2 and also above the consensus estimate, which was pegged at 6.5

The Philadelphia Fed's Manufacturing Business Outlook Survey dropped to 6.3 in January from a downwardly revised 24.3 (from 24.5) while the consensus expected a drop to 19.0 

That was the lowest level since the index turned negative (-6.3) in February 2014

Tomorrow, December CPI will be released at 8:30 ET ( consensus -0.4%) while Industrial Production (consensus -0.1%) and Capacity Utilization (expected 79.9%) will cross the wires at 9:15 ET. The Michigan Sentiment Index for January (consensus 94.1) will be reported at 9:55 ET.


Dow Jones Industrial Average -2.8% YTD

S&P 500 -3.2% YTD

Nasdaq Composite -3.5% YTD

Russell 2000 -4.0% 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.