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Leigh Baldwin & Co.

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Day Traders Diary

9/22/16

 The stock market ended the Thursday affair on a higher note as participants continued to mull over yesterday's policy decision and guidance from the Federal Reserve. The broader market maintained its risk-on posture for a second session as the Nasdaq Composite (+0.8%) finished ahead of both the S&P 500 (+0.7%) and the Dow Jones Industrial Average (+0.5%).

The Federal Reserve sparked a risk rally in global markets after voting to leave the target range of the fed funds rate unchanged (0.25% to 0.50%) at yesterday's policy meeting. Investors shook off persisting concerns regarding a potential September rate hike and also adjusted their rate hike expectations for the years ahead. The FOMC lowered its median projections for the fed funds rate to 0.6% for 2016, 1.1% for 2017, and 1.9% for 2018.

It is also worth noting that the committee reported that the case tightening has strengthened in recent months as three members supported a hike at yesterday's meeting. This leaves the door open for a potential rate hike before the end of the year. The implied probability of a rate hike at the December meeting registers at 58.4% after beginning the week at 55.0%.

The benchmark index notched a session high in the opening hour of trade, testing but failing to clear technical resistance near the 2180 price level. The broader market pulled back shortly thereafter as market leadership shifted away from commodity-sensitive energy (+0.2%) and materials (+0.3%) and towards defensively-oriented consumer staples (+0.9%), telecom services (+1.1%), and real estate (+1.9%). This also corresponded with a slight recovery in the U.S. Dollar Index (95.41, -0.25, -0.27%). Dollar-denominated commodities finished mostly higher with WTI crude ending up 2.2% ($46.33/bbl; +$0.99) on the day.

The broader market finished in the upper end of today's trading range as all eleven sectors settled in the green. The heavily-weighted industrial (+0.8%), consumer discretionary (+0.8%), and health care (+0.8%) sectors finished behind consumer staples (+0.9%), telecom services (+1.1%), and real estate (+1.9%). On the flipside, the financial sector (+0.3%) rounded out the leaderboard.

The consumer discretionary space (+0.8%) finished ahead of the broader market as heavily-weighted Amazon (AMZN 804.70, +14.96) displayed relative strength. The name jumped 1.9% after being upgraded to "Buy" from "Hold" at Argus. Meanwhile, Carnival (CCL 46.84, +1.02) and Royal Caribbean (RCL 70.99, +3.13) outperformed after the European Commission proposed a Political Dialogue and Cooperation Agreement with Cuba. Recall that Carnival opened new routes to Cuba earlier in the year.

In the health care space (+0.8%), Mylan Labs (MYL 42.59, +0.68) rallied 1.6% after CEO Heather Bresch testified before the House Oversight and Government Reform Committee yesterday. Ms. Bresch addressed the ongoing controversy regarding Mylan's EpiPen pricing. Mylan has gained 0.5% in September after falling 9.5% in the prior month. The broader iShares Nasdaq Biotechnology ETF (IBB 300.08, +2.55) finished slightly ahead of the health care sector, ticking higher by 0.9%.

The financial sector (+0.3%) underperformed as investors eyed a downturn in long term Treasury yields and diminished rate hike expectations. Wells Fargo (WFC 45.72, -0.11) declined 0.2% after a group of U.S. Senators asked the Labor Department to investigate the bank. Wells Fargo has lost 10.0% in September amid ongoing concerns over prior sales practices. Conversely, the real estate sector (+1.9%) outperforms as rate-sensitive real estate investment trusts have displayed relative strength so far this month.

Treasuries ended on a mixed note with the long end of the curve outperforming. The yield on the 2-yr note finished flat (0.77%) while the yield on the 10-yr note declined three basis points (1.62%).

Today's participation was roughly in-line with the recent average as more than 833 million shares changed hands on the NYSE floor.

Today's economic data included weekly initial claims, the FHFA Housing Price Index for July, Existing Home Sales for August, and Leading Indicators for August:

Initial jobless claims for the week ending September 17 decreased by 8,000 to 252,000 (Briefing.com consensus 262,000).

Continuing claims for the week ending September 10 decreased by 36,000 to 2.113 million.

The FHFA Housing Price Index for July rose 0.5%, which followed an increase of 0.2% in June.

Existing home sales decreased 0.9% month-over-month in August to a seasonally adjusted annual rate of 5.33 million (Briefing.com consensus 5.50 million), up 0.8% from last year.

Existing home sales in July were revised down to 5.38 million from 5.39 million.

The Conference Board's Leading Economic Index declined 0.2% in August (Briefing.com consensus +0.1%) on the back of an upwardly revised 0.5% increase (from 0.4%) for July.

This was the second time over the last four months that the index has been negative.

For more on these economic releases, be sure to visit Briefing.com's Economic Calendar page.

There is no economic data scheduled to be released tomorrow.

 

Russell 2000: +11.2% YTD
Nasdaq Composite: +6.6% YTD
S&P 500: +6.5% YTD
Dow Jones: +5.6% 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.