Day Traders Diary

1/27/16

The stock market ended its Wednesday affair under heavy selling pressure as the major indices sold off in response to the Federal Open Market Committee's policy statement for January. Today's trade saw a break with tradition as a jump in crude prices was not enough to alter the trajectory of the market. The S&P 500 (-1.1%) and the Dow Jones Industrial Average (-1.4%) returned all of their inter-day gains, but finished ahead of the tech-heavy Nasdaq (-2.2%), which spent the day in negative territory.

A rebound in crude oil helped lift equity markets from their opening lows, but the stock market stopped following oil once the FOMC statement crossed the wires. As for oil, WTI crude managed to attract buyers despite the commodity showing larger than expected builds in both the EIA and API weekly inventories. This bullish activity in the face of poor data and increasing chatter regarding production cut agreements between OPEC and non-OPEC states may have been enough to signal a bottom to some investors, or at the very least a spot to cover short positions. WTI crude ended its pit session higher by 2.5% at $32.22/bbl.

In the early afternoon, the latest directive from the Federal Open Market Committee demonstrated less dovish undertones than market participants may have been expecting. The statement partly acknowledged that growth had slowed and that inflation is expected to remain low in the near-term. However, the Fed's belief that inflation is expected to rise to 2.0% over the medium term in the face of declines in energy and import prices creates doubt as to whether the central bank will revise its glide path. Stocks ticked up immediately after the release, but followed that move with a slide to new lows.

A key earnings miss in the influential technology sector (-2.5%) helped keep the group at the bottom of the leaderboard. Technology was joined by heavily-weighted consumer discretionary (-1.5%) and health care (-1.1%) while telecom services (+0.8%) and utilities (+0.2%) ended in the green.

In the top-weighted technology space Apple (AAPL 93.44, -6.54) underperformed after issuing Q2 guidance below expectation while reporting a miss on revenue in their Q1 earnings report. Other heavyweight constituents like Alphabet (GOOLG 717.58, -16.21) and Facebook (FB 94.45, -2.89) shed 2.2% and 3.0%, respectively, with Facebook set to report after today's close.

Elsewhere, large-cap component Amazon (AMZN 583.35, -17.90) demonstrated relative weakness in the consumer discretionary space. Meanwhile, fellow heavyweight Disney (DIS 94.32, -1.95) outpaced the losses in the sector with a decline of 2.0%. Also of note, Netflix (NFLX 91.15, -6.68) slid 6.8% as the company continues to show weakness after reporting earnings last week.

Biotechnology showed relative weakness in the health care space, evidenced by the 3.1% decline in the iShares Nasdaq Biotechnology ETF (IBB 273.40, -8.68). This downshift came despite a strong performance from Biogen (BIIB 273.26, +13.39), which climbed 5.2%, after the company reported an earnings beat before today's open.

Treasuries moved to their lows during today's rally but were able to climb to session highs during the pullback in equity markets. The yield on the benchmark note ended its day unchanged at 2.00%.

Today's participation was true to recent form with more than a billion shareschanging hands at the NYSE floor.

Today's economic data included the weekly MBA Mortgage Index and the New Home Sales report. Later today the FOMC policy statement for January (Briefing.com consensus 0.5%) will be announced at 14:00 ET

The MBA Mortgage Index showed a seasonally adjusted increase of 8.8% in mortgage application from last week's 9.0 increase.

New home sales were up 10.8% month-over-month in December to a seasonally adjusted annual rate of 544,000 (Briefing.com consensus of 506,000) versus 491,000 in December (revised from 490,000).

An estimated 501,000 new homes were sold in 2015, which is up 14.5% from 2014.

Tomorrow's economic data includes weekly Initial Claims (Briefing.com consensus 285k) and Durable Orders for December (Briefing.com consensus -0.5%) being reported at 8:30 ET. Meanwhile, Pending Home Sales for December (Briefing.com consensus 0.8%) will cross the wires at 10:00 ET. 

Russell 2000 -11.8% YTD

Nasdaq  -10.8% YTD

Dow Jones -8.5% YTD

S&P 500 -7.9% YTD