Day Traders Diary
10/4/12Stocks began the session with a bullish bias. The rally reached session highs 30 minutes after the open when the August factory orders report indicated a 5.2% decrease. The number was not positive in itself, posting its worst reading since January 2009. However, it was better-than-feared as expectations called for a 6.0% pullback. After marking session highs, stocks spent the remainder of the day hovering near those levels. As a result, the S&P 500 closed with a gain of 0.7%.
The Federal Open Market Committee minutes suggested that economic activity continued to increase at a moderate pace in recent months. Employment rose slowly, but the unemployment rate remained high. Consumer price inflation was subdued, while measures of long-run inflation expectations remained stable. The committee also believes that significant additional asset purchases should not adversely affect the ability to tighten the stance of policy when doing so becomes appropriate.
The financial sector was the top performer, and the SPDR Financial Select Sector ETF (XLF 16.06, +0.23) settled higher by 1.5%. Major names showed strength across the board as Bank of America (BAC 9.41, +0.30) led its peers with a 3.3% gain. Meanwhile, Citigroup (C 34.96, +0.90), JPMorgan Chase (JPM 41.82, +0.96), and Morgan Stanley (MS 17.47, +0.44) all added in excess of 2.0%.
Elsewhere, Invesco Mortgage Capital (IVR 20.99, +0.59) advanced 2.9% after Morgan Stanley upgraded the stock from 'equal-weight' to 'overweight.'
The Dow Jones Transportation Average gained 0.9%. Transportation stocks extended their run from yesterday, but today's strength resulted from notable gains made by a couple of individual names. Ryder System (R 41.56, +2.35) jumped 6.0% after Sun Trust Robinson Humphrey upgraded the stock from 'neutral' to 'buy.'
Meanwhile, railroads Kansas City Southern (KSU 75.22, +1.49) and Union Pacific (UNP 121.57, +0.93) settled higher by 2.0% and 0.8%, respectively.
Airlines showed some weakness after yesterday's broad advances. Southwest Airlines (LUV 9.09, -0.06) and United Continental (UAL 20.81, -0.33) slipped between 0.6% and 1.6%.
The technology sector was the biggest laggard of the session. Two names within the space showed weakness after cutting their third quarter guidance below consensus. O2Micro (OIIM 3.54, -0.24) fell 6.4% after lowering guidance due to broad-based weakness in the company's end markets.
Meanwhile, Informatica (INFA 26.03, -7.59) sank 22.6% after lowering its earnings and revenue estimates. The company said that softening demand in Europe was the primary reason for the weakness. Qlik Technologies (QLIK 19.54, -1.30) slid 6.2% as it traded down in sympathy.
A couple of names saw gains following analyst upgrades. eBay (EBAY 49.49, +0.90) rose by 1.9% after Nomura upgraded the online auction site from ' neutral' to 'buy.' In addition, BCD Semiconductor (BCDS 3.75, +0.20) jumped 5.6% after Raymond James upgraded the stock from 'underperform' to 'market perform.'
Earlier, retailers reported same store sales for the month of September. Out of the 18 companies which have already announced their results, ten reported below analyst expectations. The SPDR S&P Retail ETF (XRT 63.55, +0.98) added 1.6% despite the mixed results.
Looking at individual names, Costco (COST 101.48, +1.86) and Cato (CATO 30.28, +0.68) advanced 1.9% and 2.3%, respectively. Costco reported a 6.0% increase in September same store sales which was ahead of analyst expectations of a 5.2% increase. Meanwhile, Cato's 4.0% decrease was below expectations which called for sales to slip 0.7%.
Bon-Ton Stores (BONT 11.05, -0.91) slid 7.6% after reporting a 0.6% increase in same store sales. The Retail Metrics consensus called for a slightly higher growth of 1.0%.
The latest weekly initial jobless claims count totaled 367,000, which was higher than the 365,000 that had been expected. The tally was above the revised prior week count of 363,000. As for continuing claims, they were unchanged at 3.281 million.
The September Challenger Job Cuts report indicated a 70.8% year-over-year decrease in job cuts.
Tomorrow's economic releases will focus on jobs. Nonfarm payrolls, nonfarm private payrolls, unemployment rate, hourly earnings, and average workweek will all be released at 8:30 ET. In addition, consumer credit data will be reported at 15:00 ET.
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