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Leigh Baldwin & Co.

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Day Traders Diary

1/29/16

The major indices ended the last trading session of a miserable January on a sharply higher note. Today's rally followed the Bank of Japan's vote to adopt a negative interest rate policy while oil added to its recent advance. The Dow Jones Industrial Average (+2.5%) paced the S&P 500 (+2.5%) while the Nasdaq (+2.4%) followed.

 Despite today's rally, the S&P 500 tumbled 5.1% in January while the Nasdaq surrendered 7.9% as global growth concerns returned into focus. On that note, market participants are scheduled to receive key manufacturing data out of China and the U.S. on Monday, which may influence how the market starts February.

Overnight, the Bank of Japan narrowly voted to approve a negative interest rate on some excess reserves. At its core, the new policy is meant to discourage parking deposits at the central bank in order to have the capital take a more active role in propping up and expanding the country's economy. The policy change struck a cautious note, as the move might signal an exhaustion of quantities easing measurers, but nevertheless global indices rallied on the news of continued easing.

Oil was able to benefit from the positive market conditions as the commodity rallied above the $33.00/bbl level overnight. Ongoing speculation regarding supply cut cooperation between OPEC and non-OPEC states helped drive the commodity to the $35.00/bbl price level. The energy component surrendered this price level after reports indicated that Iran would not join a coordinated production cut with OPEC. Despite this news, WTI managed to maintain part of its advance, ending its pit session with a 1.5% gain at $33.73/bbl.

Technology (+3.6%) outperformed the other sectors as materials (+2.9%) and industrials (+2.8%) followed while consumer discretionary (+1.2%) and health care (+1.8%) underperformed.

In the heavily-weighted technology space, Microsoft (MSFT 55.09, +3.04) shot up 5.8% after the company reported a beat in their fourth quarter earnings report. The large-cap helped lift the larger sector to the top of the leaderboard and built on yesterday's interest in tech names. Facebook (FB 112.21, +3.10) was able to continue its advance following yesterday's earnings beat while Apple (AAPL 97.34, +3.25) recovered from its miss. Elsewhere, high-beta chipmakers showed relative strength, evidenced by the 4.6% gain in the PHLX Semiconductor Index.

Dow component Chevron (CVX 86.47, +0.55) added 0.6% on the heels of an earnings miss while fellow energy giant Exxon Mobil (XOM 77.85, +0.86) underperformed ahead of its earnings report on Tuesday. Meanwhile in the larger energy sector, Phillips 66 (PSX 80.15, +1.45) was able to climb 1.8% after spending most of its day beneath its flat line despite beating earnings estimates.

The health care space (+1.8%) was the only countercyclical sector to end the week in negative territory. Biotechnology showed relative weakness all week, evidenced by the iShares Nasdaq Biotechnology ETF's (IBB 264.11, +0.64) 7.3% slide since last Friday.

Heavyweight Amazon (AMZN 587.00, -48.35) kept the consumer discretionary space behind the broader market, as the stock plummeted 7.6% after missing analyst expectations regarding operating income and EPS. Elsewhere in the space, fellow F.A.N.G. member, Netflix (NFLX 91.84, -2.57) showed continued weakness, falling 2.7%.

Treasuries traded near their highs the entire session, suggesting investors may have taken advantage of international rate differentials. The yield on the benchmark note ended the day lower by five basis points at 1.93%.

Today's trading volume kept with recent trends and was relatively heavy with more than 1.6 billion shares changing hands at the NYSE floor.

Today's economic data included the advance reading of Q4 GDP, the Q4 Employment Cost Index, Chicago PMI for January, and the final reading of the January Michigan Sentiment Index.

The advance fourth quarter GDP report was quite weak as expected, showing an annualized rate of real GDP growth of just 0.7% (Briefing.com consensus 0.9%) and down from 2.0% in the third quarter.

The report showed weak quarter-over-quarter readings for all key components.

Personal consumption expenditures increased 2.2% versus 3.0% in Q3, gross private domestic investment declined 2.5% after a 0.7% declined in Q3, exports fell 2.5% after increasing 0.7% in Q3, imports rose 1.1% after increasing 2.3% in Q3. Final sales of domestic product, which exclude the change in inventories, were up just 1.2% after increasing 2.7% in the third quarter. That was the weakest pace since a 0.2% decline in the first quarter of 2015.

The Employment Cost indexrpse 0.6% (Briefing.com consensus 0.6%)

The GDP Deflator was up 0.8% (Briefing.com consensus +0.9%) after a 1.3% increase in the third quarter.

The Chicago Purchasing Managers Index produced some good news, surging 12.7 points to 55.6 from 42.9 in December. (Briefing.com consensus 45.0) and the highest reading in a year.

The move in January was powered by big upticks in its two largest components: new orders (from 38.6 to 58.8) and production (from 46.7 to 62.5).

The final reading for the University of Michigan Consumer Sentiment Survey for January dipped to 92.0 from the preliminary reading of 93.3. The final reading was below the (Briefing.com consensus 93.2)

The January reading marked a downturn from the final reading of 92.6 for December. It was said the stock market declines and weakened prospects for the national economy factored into the dip in consumer sentiment. There was no evidence that the East Coast blizzard influenced the final reading for January. One item highlighted in the review of the survey was that favorable financial prospects have become dependent on very low inflation.

China's Official Manufacturing PMI and Caixin Manufacturing PMI are scheduled to be released on Sunday at 20:00 ET and 20:45 ET, respectively.

Monday's domestic economic data will include the 8:30 ET release of PCE Prices for December (Briefing.com consensus 0.2%) while Construction Spending for December (Briefing.com consensus 0.5%), and the January ISM Index (Briefing.com consensus 48.3) will cross the wires at 10:00 ET.

 

Russell 2000 -8.6% YTD

Nasdaq -7.9% YTD

Dow Jones -5.5% YTD

S&P 500 -5.1% 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.