Day Traders Diary



The stock market trades on a mixed note at midday as the major averages move to session lows after the S&P 500 (+0.1%) failed to clear resistance at the 2100/2104 level. Focal points of today's action have included weaker than expected economic data, a rally in crude oil, mixed earnings results, and split leadership between the heavily-weighted financial (+0.8%) and technology (-0.9%) groups. The Nasdaq Composite (-0.6%) trades behind the S&P 500 (+0.1%) and the Dow Jones Industrial Average (+0.1%).

The major indices began their day on a higher note as equities responded to strong performances overseas. Particularly, Japan's Nikkei (+3.7%) outperformed as the index benefited from weakness in the yen and hints of further stimulus measures. Meanwhile, a rebound in crude oil helped support the broader market and add to the recent uptick in risk appetite.

WTI crude trades higher by 3.1% ($42.45/bbl) as investors shift their focus from this weekend's failed meeting between oil producers to the continuing strike of energy and gas workers in Kuwait. As a result, commodity-sensitive materials (+1.5%) and energy (+1.5%) lead the pack.

However, the major averages have pulled back from their session highs as selling pressure increased at their session highs. Currently, eight sectors trade in the green with financials (+0.8%) and telecom services (+0.5%) following energy (+1.5%) and materials (+1.5%) on the leaderboard.

In the financial sector (+0.8%), money center banks continue to outperform as they follow Dow component Goldman Sachs (GS 161.52, +2.50) higher. The company reported a bottom-line beat on lighter than expected revenue before today's opening bell. Elsewhere in the space, capital markets name Northern Trust (NTRS 71.09, +2.80) has gained 4.1% after reporting an earnings beat on in-line revenue in the first quarter. The broader financial sector has trimmed its year to date loss to 2.6%.

Conversely, two sectors trade in the red with influential technology (-0.9%) and consumer discretionary (-0.6%) leading to the downside.

In the influential technology sector (-0.9%) the high-beta chipmakers underperform, evidenced by the 1.5% decline in the PHLX Semiconductor Index. Meanwhile, Dow component IBM (IBM 142.82, -9.71) has slipped 6.4% after issuing below-consensus guidance for the second quarter. In the broader technology space, Alphabet (GOOGL 775.58, -12.10) has fallen 1.5% after reports indicated that the European Union is scheduled to file an antitrust suit against the tech name.

The health care space (+0.2%) moved from leader to laggard as biotechnology moved to new lows. Currently, the iShares Nasdaq Biotechnology ETF (IBB 279.90, -5.07) trades lower by 1.8%. Meanwhile, Johnson & Johnson (JNJ 112.90, +1.97) has gained 1.8% after reporting an earnings beat and raising its guidance to account for recent weakness in the dollar.

The U.S. Dollar Index (93.98, -0.51) hovers above its session low as the Canadian dollar and the euro gain against the greenback. The dollar/Canadian dollar pair trades lower by 0.9% at 1.2668 as the commodity-sensitive currency benefits from today's bid in oil. Meanwhile, the single currency has gained 0.6% against the dollar (1.1377).

The Treasury complex has pulled back from its session low as the yield on the 10-yr note is now unchanged at 1.78%.

Today's economic data included March Building Permits and Housing Starts: 

  • The Housing Starts and Building Permits report for March was definitely a disappointment. Starts fell 8.8% from the prior month to a seasonally adjusted 1.089 million units ( consensus 1.17 million). 
    • The weakness in starts was presumably due to some of the typical Spring building getting pulled forward during the warmer-than-usual winter months. To be sure, there is always an excuse for everything in a trending market.
    • The downturn was paced by a 9.2% slide in single-family starts, which saw declines in all regions: Midwest (-21.2%), West (-9.1%), Northeast (-8.6%), and the South (-4.9%). Multi-unit starts were down 7.9%.
  • Building permits, meanwhile, declined 7.7% to 1.086 million ( consensus 1.200 million).
    • Building permits are a leading indicator, so the March data is not an encouraging sign for future building activity. Only the South (+1.8%) saw a pickup in permits for single-family units.
  • The one positive in the report is that the number of homes under construction jumped to 990,000 from 985,000 in February. That will be a positive input in first quarter GDP forecasts as the first quarter average of 984,000 was above the fourth quarter average of 962,000.

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