Day Traders Diary


Equities finished today's session on a mixed note. The Dow and S&P 500 gained 0.5% each, while the Nasdaq underperformed, and ended flat. However, looking below the surface revealed the sector rotation which took place today.

The energy space paced today's advance thanks in part to strong earnings from Valero (VLO 43.77, +4.96). In addition, the 1.1% advance in crude oil also contributed to the sector's strength.

After energy, health care, telecoms, and utilities were among the day's top performers as investors rotated into defensive-oriented stocks. In the health care space, Eli Lilly (LLY 54.32, +1.68) and Pfizer (PFE 27.70, +0.86) both gained 3.2% after reporting upbeat earnings.

Today's performance of telecoms expands on the theme of sector rotation. AT&T (T 34.68, +0.55), Sprint Nextel (S 5.64, +0.08), and Verizon Communications (VZ 43.50, +0.73) all gained near 1.5%.

While defensive sectors led the way, the discretionary space underperformed as the SPDR Consumer Discretionary Select Sector ETF (XLY 50.46, -0.20) slipped 0.4%. Ford Motor (F 13.14, -0.64) was a notable laggard after the carmaker shed 4.6% despite an earnings beat. While the company expressed concerns about its European sales, the remarks were in-line with comments made during past earnings calls.

The discretionary sector avoided wider losses thanks to the relative strength observed in homebuilders. This morning, DR Horton (DHI 23.82, +2.51) beat on both earnings and revenue. The strong report was welcomed by investors and shares of DR Horton spiked 11.8%. Meanwhile, the broader SPDR S&P Homebuilders ETF (XHB 29.10, +0.29) gained 1.0%.

Although the technology sector ended with gains, its true performance was masked by the relative strength of Apple (AAPL 458.27, +8.44), which gained 1.9% after announcing a 128GB version of its fourth generation iPad device.

Tech stocks saw broad weakness and VMware (VMW 77.14, -21.18) was a notable laggard. The company, which specializes in technology infrastructure, plunged 21.5% after issuing cautious guidance. In addition, VMware announced plans to cut about 7.0% of its workforce.

Elsewhere in tech earnings, Seagate (STX 33.91, -3.50) fell 9.4% after it too issued guidance which disappointed investors. Note that today's selling came after Seagate rallied nearly 50.0% in the eight weeks leading into yesterday's report.

Volume was slightly above its 50-day average as more than 700 million shares changed hands on the floor of the New York Stock Exchange.

The CBOE Volatility Index (VIX 13.33, -0.24) ended lower by 1.8% after the past two session saw the near-term volatility measure settle in the black.

The market received just two economic data points today. The November Case-Shiller 20-city Home Price Index rose by 5.5%, while a 5.2% increase had been expected by the consensus. This follows the previous month's increase of 4.3%.

Meanwhile, the January consumer confidence reading of 58.6 fell short of the 65.1 expected by the consensus. Though equities slipped immediately after the report hit the wires, the weakness proved to be short-lived.

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET. At 8:15 ET, the January ADP Employment Change will be reported. Fourth quarter advanced GDP growth will hit the wires at 8:30 ET, and the Federal Reserve will top off the busy day of economic releases with its rate decision and policy statement scheduled for 14:15 ET. Among earnings of note, Boeing (BA 73.65, -0.35) will announce its quarterly results prior to the open.

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