Day Traders Diary


The major averages finished the Wednesday session on a flat note thanks to a late afternoon crawl that lifted the market off its low. The S&P 500 ended unchanged while the Nasdaq outperformed, adding 0.1%.

For the second day in a row, stocks opened with slim losses and drifted inside narrow ranges until the early afternoon. The S&P 500 spiked off its low and made a brief appearance in the green following the FOMC minutes from the January meeting, but the index was back near its low just 30 minutes later. A second effort in the late afternoon propelled the S&P 500 back to its flat line ahead of the close.

It was a bit surprising to see the market react rather lackadaisically to the FOMC minutes, considering they revealed a high likelihood that the Fed will not be raising rates any time soon due to several risks including declining inflation and weak global growth.

Meanwhile, the Treasury market heard the message and responded with a rally. The 10-yr note reclaimed about half of yesterday's decline with the benchmark yield dropping six basis points to 2.08%. On a related note, the dollar surrendered its intraday gain following the minutes.

The FOMC minutes overshadowed afternoon reports from the Wall Street Journal indicating the European Central Bank will extend Greece's Emergency Liquidity Assistance allowance by EUR3.50 billion to EUR68.50 billion for two weeks. However, that may not be enough next week when Greece's government runs out of cash, according to Kathimerini. German ECB members have recently opposed using ELA funds to finance governments, which may explain the limited scope of the increase.

Furthermore, Greece's government spokesperson said the government plans to request an extension to the current loan agreement. Until now, Germany has opposed granting unconditional extensions so it remains to be seen whether the request is granted.

Six of ten sectors posted gains, but only three—industrials (+0.6%), consumer staples (+0.6%), and utilities (+2.4%)—added more than 0.3%. On the flip side, financials (-0.6%) surrendered their gain from yesterday while the energy sector (-1.2%) was responsible for much of the early weakness.

The energy sector weighed as crude oil returned to yesterday's intraday low, falling 2.7% to $52.12/bbl.

Elsewhere among cyclical sectors, industrials rallied behind heavyweights like Boeing (BA 151.17, +1.25), General Electric (GE 25.25, +0.08), and Deere (DE 92.75, +2.83) with shares of DE getting a boost after it was reported Berkshire Hathaway invested in the company during Q4.

Transport stocks also contributed to the strength of the industrial sector with the Dow Jones Transportation Average adding 0.4%. Airlines led the way thanks to lower oil prices with United Continental (UAL 66.72, +1.79) surging 2.8%.

Another cyclical group—consumer discretionary (-0.1%)—caught up to the market by the end of the day, but was pressured early by apparel retailers after Fossil (FOSL 83.69, -15.63) disappointed with its earnings/guidance and discussed currency headwinds—a concern that could be echoed by its peers in the coming weeks.

Once again, today's participation was well below average with just 716 million shares changing hands at the NYSE floor.

Economic data included Housing Starts, PPI, Industrial Production, Capacity Utilization, and MBA Mortgage Index:
  • New housing starts declined 2.0% in January to 1.065 million from a downwardly revised 1.087 million (from 1.089 million) in December while the consensus expected a drop to 1.070 million 
    • After a big rush in single-family starts in December, new single-family construction fell back to November levels, dropping 6.7% to 678,000 from 727,000 in December 
  • Producer prices declined 0.8% in January after declining an upwardly revised 0.2% (from -0.3%) in December while the consensus expected a decline of 0.4% 
    • A large portion of the decline resulted from falling energy prices with prices of total energy goods declining 10.3% in January after a 6.2% drop in December. Gasoline prices dropped 24% in January 
    • Food prices fell 1.1% in January after declining 0.1% in December 
    • Excluding food and energy, core PPI declined 0.1% in January after increasing 0.3% in December while the consensus expected an uptick of 0.1% 
  • Industrial production increased 0.2% in January after declining a downwardly revised 0.3% (from -0.1%) in December while the consensus expected an increase of 0.4% 
    • Manufacturing production increased 0.2% in January after being flat in December, which was in-line with the national ISM Production Index. The index softened slightly in January to 56.5 from 57.7 in December 
  • The weekly MBA Mortgage Index fell 13.2% to follow last week's 9.0% decline 
Tomorrow, weekly Initial Claims ( consensus 295K) will be released at 8:30 ET while January Leading Indicators (consensus 0.3%) and the Philadelphia Fed Survey for February (consensus 8.5) will cross at 10:00 ET.

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