Day Traders Diary
The stock market secured its fifth consecutive advance with the S&P 500 rising 0.2% to extend this week's advance to 2.5%. True to this week's form, small caps outperformed, sending the Russell 2000 higher by 1.6%. The domestically-oriented index will enter Friday with a 5.5% gain for the week.
Equity indices spent the early action near their flat lines as participants digested the latest policy statement from the European Central Bank. The ECB made no changes to its interest rate corridor, but announced that its asset purchase program will be extended until December. The news of an extension overshadowed the revelation that the pace of purchases will slow to EUR60 billion from EUR80 billion, starting in March.
The euro jumped against the dollar immediately after the announcement, but reversed off its high (1.0875), sliding nearly 300 pips to a new session low (1.0603). The decline was accelerated by comments from ECB President Mario Draghi, who said that the central bank will buy assets that have a lower yield than the current deposit rate. The weakness in the euro lifted the U.S. Dollar Index (101.08, +0.85) into the neighborhood of this year's high.
A modest wave of selling developed during the last two hours of action, but eight out of eleven sectors still ended the day with gains.
A handful of cyclical sectors struggled at the start, but the notable resilience that has been observed as of late made its appearance known once again. Top-weighted sectors like technology (+0.4%) and financials (+0.9%) climbed into the afternoon, which helped push the S&P 500 to a fresh intraday record high.
The financial sector (+0.9%) continued its torrid stretch, extending this week's gain to 4.7%, which puts the group well ahead of its peers. Today's advance took place on the back of steepening in the yield curve, which pushed up the 2s10s spread to 130 basis points—just one basis point below this year's high.
Growth-sensitive sectors like energy (+0.5%) and materials (+0.7%) outperformed throughout the day, but the energy sector could not catch up to crude oil, which spiked 2.0% to $50.85/bbl despite dollar strength.
The consumer discretionary space (+0.1%) spent the day behind the broader market as losses in select retailers and casino names offset strength on the apparel side. TailoredBrands (TLRD 26.44, +7.51) and Lululemon (LULU 68.84, +9.00) were among the standouts thanks to above-consensus earnings and upbeat guidance. The two soared 39.7% and 15.0%, respectively.
Also on the earnings front, Costco (COST 157.59, +3.74) jumped 2.4% after its quarterly report showed an increase in membership fees. However, the broader consumer staples sector (-0.5%) underperformed throughout the day.
The remaining countercyclical sectors flashed losses at the start, but health care (+0.2%), utilities (+0.3%), and real estate (+0.5%) recovered by the close.
Longer-dated Treasuries retreated while the front of the curve held unchanged, leaving the 2-yr yield at 1.10% while the 10-yr yield rose five basis points to 2.40%.
Today's participation was just above average as more than 960 million shares changed hands at the NYSE floor.
Economic data was limited to weekly initial claims, which decreased by 10,000 to 258,000 (Briefing.com consensus 255,000), marking the 92nd straight week they have been below 300,000. Continuing claims for the week ending November 26 dropped by 79,000 to 2.005 million.
Tomorrow's economic data will be limited to the 10:00 ET release of the preliminary reading of Michigan Sentiment Index for December (Briefing.com consensus 94.3) and October Wholesale Inventories (Briefing.com consensus -0.4%).
Russell 2000 +22.6% YTD
Dow Jones Industrial Average +12.6% YTD
S&P 500 +9.9% YTD
Nasdaq Composite +8.2% YTD