Day Traders Diary

2/16/16

The stock market ended its first session of the week on a higher note, with the major indices continuing their rally from the end of last week. Today's trade saw a departure from the recent trend of equities trading lockstep with oil, as well as a persisting appetite for risk in recently sold off sectors. The Nasdaq Composite (+2.3%) ended ahead of the S&P 500 (+1.7%) and the Dow Jones Industrial Average (+1.4%).

U.S. futures were able to capitalize on positive sentiment out of Europe and Asia thanks in part to dovish comments and a positive view on the banking sector from the President of the European Central Bank Mario Draghi. In remarks on Monday, the central bank President defended the banks' capital position and reiterated that the ECB is prepared to do its part to help bolster growth in the region. This sentiment paired with a deal between OPEC and non-OPEC members on a production level freeze was enough to boost futures overnight.

However, market sentiment soured on this deal shortly before the U.S. open, as market participants appeared to favor a production cut agreement. Additionally, doubt over whether Iran and Iraq will participate in the freeze has taken some shine off the deal. Regardless, Saudi Arabia, Russia, Qatar, and Venezuela have proposed a freeze in production at January levels. WTI crude ended its pit session lower by 1.0% at $29.05/bbl.

All ten sectors were able to end their day in positive territory with consumer discretionary (+2.5%), industrials (+2.0%), technology (+1.9%), financials (+1.8%), and health care (+1.8%) leading the pack. These also happen to be the heaviest weighted sectors in the S&P 500, and they outweighed relative weakness in energy (+0.8%).

In the consumer discretionary space, large-cap Priceline (PCLN 1110.68, +52.67) outperformed ahead of its earnings report before tomorrow's open. Meanwhile, diversified media companies showed relative strength after last week's rough outing. On that note, Viacom (VIAB 34.29, +1.48) rebounded 4.5% after falling 18.1% since its February 8 earnings report.

Money center banks demonstrated relative strength in the financial sector. Morgan Stanley (MS 23.72, +0.63) outperformed after receiving several upgrades including an upgrade at JP Morgan from "Neutral" to "Overweight". Conversely, American International Group (AIG 52.06, -0.94) pulled back slightly from Friday's 4.9% rally.

The high-beta chipmakers outperformed in the heavyweight technology space. Sub-group constituents Micron Technology (MU 10.81, +0.79) and Qorvo (QRVO 40.78, +3.23) helped lead the PHLX Semiconductor Index (+3.5%) with gains of 7.9% and 8.6%, respectively. Meanwhile, large cap Apple (AAPL 96.55, +2.56) outperformed.

In the health care space, Bristol-Myers Squibb (BMY 62.18, +1.98) gained 3.3% after Barron's voiced a positive view on the stock over the weekend. Biotechnology had a better showing than the broader health care sector, evidenced by a 3.0% climb in the iShares Nasdaq Biotechnology ETF (IBB 258.72, +7.53).

Treasury yields fluctuated in a narrow range today as the rally in equities went on throughout the day. The yield on the 10-yr note ended its session higher by three basis points at 1.78%.

Today's participation was close to recent averages with more than 1.2 billion shares changing hands at the NYSE floor.

Today's economic data included the Empire Manufacturing Survey for February and the NAHB Housing Market Index for February.

The Empire Manufacturing Survey showed a reading of -16.6 for February (Briefing.com consensus -9.9) versus a prior reading of -19.4. Granted the pace of slowdown decelerated in February, yet things are still a long way from being in a state of expansion in the New York Fed region

The NAHB Housing Market Index for February came in at 58 from a revised 61 in January (from 60) while the Briefing.com consensus expected the reading to come in at 60.0.

After today's session FOMC voting member and Boston Fed President Eric Rosengren is scheduled to speak at 19:30 ET.

Tomorrow's economic data includes the 7:00 ET release of the weekly MBA Mortgage Index while January PPI (Briefing.com consensus -0.2%), January Housing Starts (Briefing.com consensus 1171k), and January Building Permits (Briefing.com consensus 1200k) will be released at 8:30 ET. Separately, the January Industrial Production Report (Briefing.com consensus +0.3%) and Capacity Utilization (Briefing.com consensus 76.6%) will cross the wires at 9:15 ET. Finally, the FOMC minutes from the January 27th meeting will be released at 14:00 ET.

Russell 2000 -12.3% YTD

Nasdaq -11.4 % YTD

S&P 500 -7.3% YTD

Dow Jones -7.1% YTD