Day Traders Diary

6/6/16

The major averages ended their day on a higher note as investors deciphered recent remarks from Fed Chair Yellen about the economic outlook and monetary policy. Other focal points for today's trade included strength from the oil patch, continued softness in the dollar, relative weakness in safe-haven areas, and key sector leadership from the heavily-weighted industrial (+0.8%) and financial (+0.6%) sectors.

The major indices ended the session off their best levels of the day as selling interest picked up just ahead of the close. In doing so, the S&P 500 (+0.5%) failed to close above its prior intraday high this year of 2111.05, yet it still logged a new closing high for the year.

The benchmark index managed to set a new intraday high for the year (2113.36) following mixed remarks from Fed Chair Yellen.

Ms. Yellen stated in prepared remarks that she remains positive on the economic outlook of the U.S. economy and warned that too much significance should not be assigned to one monthly report. However, Ms. Yellen also stated that last Friday's Employment Situation Report was concerning on balance.

Cues for a potential rate hike "in the coming months" were noticeably absent from her speech, but she maintained that further gradual increases in the federal funds rate are likely to be appropriate and conducive to meeting and maintaining the Fed's dual mandate.

Eight sectors ended the session with gains.  The commodity-sensitive energy (+2.0%) and materials (+0.9%) sectors led the way, followed by the industrial (+0.8%), financial (+0.6%) and health care (+0.6%) sectors.  On the other side of the board, the countercyclical utilities (-0.2%) and telecom services (UNCH) sectors were the only two sectors to end the day with a loss.

The Dow Jones Industrial Average (+0.6%) ended ahead of the Nasdaq Composite (+0.5%) and the S&P 500 (+0.5%).

The energy space (+2.0%) showed broad-based strength as oil prices increased 2.1% ($49.73/bbl, +$1.04). The energy component benefited from a softening dollar and potential supply worries out of Nigeria. In the group, ConocoPhillips (COP 42.52, +1.34) and Anadarko Petroleum (APC 53.28, +1.89) gained 3.0% and 3.7%, respectively.

In the industrials sector (+0.8%), aerospace names outperformed as they traded higher in sympathy with Boeing (BA 131.90, +4.52). The Dow component gained 3.6% and led the price-weighted index as investors weighed a potential contract with Iranair. Conversely, Delta Air Lines (DAL 41.28, -0.29) and CSX (CSX 26.50, -0.14) ended at the bottom of the Dow Jones Transportation Average (+0.6%).

The financials sector (+0.6%) finished off its best level of the day, yet it recouped a good portion of its 1.4% loss from Friday. The sector saw broad-based strength with regional banks, asset management companies, and life insurance names leading the advance. Rate-sensitive real estate investment trusts (REITs) underperformed as Equity Residential (EQR 63.62, -1.35) and Welltower (HCN 69.82, -1.50) lost 2.1% apiece.

In the consumer discretionary space (+0.1%), Dow component Home Depot (HD 129.19, -2.55) finished at the bottom of the price-weighted index, held back by some bearish commentary at Cleveland Research.

Biotechnology finished ahead of the broader market as the iShares Nasdaq Biotechnology ETF (IBB 286.07, +4.30) gained 1.5%. Valeant Pharmaceuticals (VRX 28.85, -0.02) ended flat ahead of Tuesday morning's quarterly earnings report.

The U.S. Dollar Index (94.00, -0.03) ended slightly lower, coughing up some overnight gains. The euro/dollar pair finished flat at 1.1362 while the dollar gained 1.0% against the yen (107.62).

Losses were seen across the yield curve.  The yield on the benchmark 10-yr note rose three basis points to 1.73% while the yield on the 2-yr note increased two basis points to 0.80%.

There was no economic data of note released today.

Tuesday's economic data will include the revised estimate for first quarter Productivity (Briefing.com consensus -0.6%) and Unit Labor Costs (Briefing.com consensus 4.0%), which will cross the wires at 8:30 ET. Separately, Consumer Credit for April (Briefing.com consensus $18.5 billion) will be released at 15:00 ET.

Russell 2000 +3.7% YTD

S&P 500 +3.2% YTD

Dow Jones +2.8% YTD

Nasdaq Composite -0.8% YTD