Day Traders Diary

12/20/16

 The stock market registered its second consecutive advance, but intraday price action followed yesterday's pattern, suggesting the post-election rally may be running out of steam. The S&P 500 hit a session high shortly after the open, but narrowed its gain to 0.4% by the close.

The key indices raced out of the gate with the Dow Jones Industrial Average (+0.5%) setting its sights on the 20,000 mark. The price-weighted index hit a session high roughly 15 points below that level during the opening hour, slowly backing off into the afternoon.

Most cyclical sectors displayed strength from the start with three exhibiting relative strength into the close, which kept the market in the green despite the afternoon dip from highs. The financial sector (+1.1%) spent the day in the lead after underperforming yesterday. Meanwhile, the largest sector by weight—technology (+0.3%)—kept pace with the S&P 500.

However, the underperformance in technology was offset by solid gains in consumer discretionary (+0.8%) and industrials (+0.6%). The discretionary sector received broad support from retail stocks with the SPDR S&P Retail ETF (XRT 46.79, +0.67) climbing 1.5%. In earnings news, CarMax (KMX 66.16, +3.80) and Carnival (CCL 52.49, +1.17) advanced 6.1% and 2.3%, respectively, after beating earnings estimates.

As for industrials, the sector was underpinned by transport stocks, evidenced by the Dow Jones Transportation Average (+0.8%). Dow component Caterpillar (CAT 94.32, +1.61) also stood out, climbing 1.8%, after the company released its November sales figures, which showed a 17.0% year-over-year decline in total machine orders. Total energy & transportation orders declined 25.0% year-over-year, representing a slight slowdown from a 28.0% decline in October.

On the downside, the energy sector (-0.2%) spent the day in negative territory even though crude oil rose 0.3% to $53.24/bbl. Elsewhere, the consumer staples sector (-0.3%) remained at the bottom of the leaderboard throughout the day, weighed down by General Mills (GIS 61.45, -1.61). The sector heavyweight lost 2.6% after missing earnings/revenue estimates and lowering its organic sales guidance. Another countercyclical sector—health care (-0.1%)—surrendered an opening gain to end with a modest loss even though biotechnology outperformed into the close. The iShares Nasdaq Biotechnology ETF (IBB 270.76, +1.97) added 0.7%.

On the M&A front, Fred's (FRED 20.19, +9.04) agreed to acquire 865 Rite Aid (RAD 8.61, +0.44) stores for $950 million in cash. The transaction more than doubled Fred's store footprint, sending its shares higher by 81.1%.

The Treasury market ended on a mostly lower note with the 10-yr yield rising two basis points to 2.56% while the 2-yr yield held unchanged at 1.22%.

Investor participation was above average with nearly 970 million shares changing hands at the NYSE floor.

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while November Existing Home Sales (Briefing.com consensus 5.50M) will be reported at 10:00 ET.

Russell 2000 +21.7% YTD

Dow Jones Industrial Average +14.6% YTD

S&P 500 +11.1% YTD

Nasdaq Composite +9.5% YTD