Day Traders Diary


  The major averages ended their midweek session sharply lower with the tech-heavy Nasdaq (-3.4%) trailing the S&P 500 (-2.5%). Equity indices surrendered their opening gains amid continued growth concerns that also pressured crude oil from its overnight high. Including today's tumble, the benchmark index has surrendered 7.5% since the beginning of 2016 while the Nasdaq has slid 9.6%.


Overnight, oil advanced from yesterday's low with better than expected December trade data from China contributing to the advance. China's trade report showed a surplus of $60.1 billion versus the expected $51.3 billion. Despite the beat, this represented the sixth consecutive month of year-over-year declines in exports. While this was not good enough to boost China's Shanghai Composite (-2.4%), it was sufficient in helping the battered commodity rally.


At the beginning of our trading day, oil was up more than 3.0%, contributing to early strength in equities. The energy-component would lose momentum shortly after the open once the weekly EIA gasoline inventories showed a build of 8.438 million barrels. WTI crude showed a loss of 1.1% before ending its pit session unchanged at $30.43/bbl. On a related note, crude inventories rose 0.243 million barrels compared to an expected increase of 2.504 million barrels.


Another reminder of the persistent growth concerns came from rail company CSX (CSX 22.35, -1.35), which issued lower 2016 guidance when it reported Q4 earnings after yesterday's close. The company cited global and industrial slow down trends that would affect their core business, leading to an expected decline in year-over-year earnings. The transports reeled from this guidance, evidenced by the 3.7% decline in the Dow Jones Transportation Average which is now down 10.5% on the year. Fellow rail company Norfolk Southern (NSC 71.44, -4.49) suffered a 5.9% decline while Avis (CAR 27.19, -2.11) posted the worst loss in the index, falling 7.2%.


Sectors like, consumer discretionary (-3.4%), health care (-2.9%), technology (-2.8%), financials (-2.6%), and industrials (-2.3%) paced the retreat while utilities (UNCH), telecom services (-1.1%), consumer staples (-1.7%), and energy (-1.8%) outperformed.


Once again, today's retreat saw the biggest losses among names that enjoyed strength in 2015. To that point, discretionary component Netflix (NFLX 106.56, -10.02) sank 8.6% following a report from ITG Research which revised revenue estimates for the company, citing domestic subscriber weakness. Elsewhere in the space, Amazon (AMZN 581.81, -36.08) declined 5.8%.


Switching to the technology space, large-cap constituents Facebook (FB 95.44, -3.93) and Alphabet (GOOGL 719.57, -25.77) showed relative weakness with respective declines of 4.0% and 3.5%. Fellow large-caps Microsoft (MSFT 51.64, -1.14) and Apple (AAPL 97.39, -2.57) fared better than the sector, but could not stay out of the red. Elsewhere in the space, the high-beta chipmakers underperformed, evidenced by the 3.1% decline in the PHLX Semiconductor Index.


Looking at the health care space, biotechnology showed relative weakness with a decline of 5.4% in the iShares Nasdaq Biotechnology ETF (IBB 280.14, -16.06).


Treasuries ended their day near their highs with the yield on the 10-yr note lower by four basis points at 2.07%.


Trading volume remained heavy with more than a billion shares changing hands at the NYSE floor once again.


Today's economic data included the MBA Mortgage Index, the December Treasury Budget, and the Federal Reserve;s January Beige Book.


The MBA Mortgage Index showed a seasonally adjusted increase of 21.3% in mortgage applications.

The December Treasury Budget showed a deficit of $14.4 billion.

The Treasury data are not seasonally adjusted, so the December deficit cannot be compared to the November deficit of $64.6 billion.

Total receipts in December were $349.6 billion while total outlays were $364.1 billion.

Receipts were $14.3 billion more than December 2014 receipts while total outlays were $30.6 billion more than December 2014.

The yearly deficit increased by $16.3 billion to $477.8 billion.

Tomorrow, weekly initial claims ( consensus 275k) and December import/export prices will be released at 8:30 ET.


Russell 2000 -11.1% YTD

Nasdaq -9.6% YTD

S&P 500 -7.5%

Dow Jones -7.3%

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