Day Traders Diary


The S&P 500 ended lower by 1.2% after European concerns returned to the forefront. Equities began the day with a broad sell-off as a downbeat European trade weighed. Italian and Spanish indices were the source of continent-wide weakness as controversy continued to plague the troubled sovereigns.In Italy the MIB lost 4.5% as authorities continue to investigate several financials, including the world's oldest bank, Banca Monte dei Paschi di Siena. Today, five of eight banks listed on the Italian MIB experienced trading halts amid the selloff. However, Monte Paschi was not one of affected names. Meanwhile, Spain's IBEX fell 3.8% as 34 of 35 listings ended in the red. The markets were rattled as Prime Minister Mariano Rajoy and other members of the People's Party find themselves in the middle of an alleged kickback scheme uncovered by Spain's largest daily newspaper, El Pais. Recent days have seen Mr. Rajoy face resignation calls from opposition leaders as well as Spanish citizens.European financials saw notable selling pressure with the weakness spilling over to their U.S. counterparts. The SPDR Financial Select Sector ETF (XLF 17.41, -0.20) slipped 1.1% with Bank of America (BAC 11.48, -0.23) and Morgan Stanley (MS 22.88, -0.63) as two of the weakest majors. The pair saw respective losses of 2.0% and 2.7%.
In addition to financials, the tech sector was one of the day's biggest laggards. The largest sector component, Apple (AAPL 442.32, -11.30) underperformed, and lost 2.5%. Including today's loss, Apple is the weakest S&P 500 performer year-to-date. The computer company has lost 16.8% since the start of 2013.
Elsewhere in tech, Dell (DELL 13.27, -0.36) slipped 2.6% after reports indicated the company's leveraged buyout will likely be near $13.50 per share, with Microsoft (MSFT 27.44, -0.49) investing about $2 billion. Today's reports follow last week's indications suggesting the deal would net between $15 and $16 per share. In acquisition news, Oracle (ORCL 35.13, -1.07) shed 3.0% after agreeing to acquire Acme Packet (APKT 29.59, +5.66) for $29.25 per share. The transaction price represents a 22.2% premium to Acme's Friday closing price. While technology (-1.6%) and financials (-1.3%) were the day's weakest sectors, consumer discretionary (-1.2%), and health care (-1.1%) stocks were not far behind. On the upside, defensively-oriented telecoms (-0.5%) and utilities (-0.7%) outperformed. Yield on the 10-yr note declined almost four basis points and finished at 1.973%, near its session lows.The CBOE Volatility Index (VIX 14.71, +1.81) surged over 14.0% as near-term downside protection received a considerable bid during the session. Looking at the term structure of VIX futures, February and March contracts have seen the most notable buying interest. Volume was slightly below its 50-day average as just under 700 million shares changed hands on the floor of the New York Stock Exchange. Today's economic data was limited to December factory orders, which rose 1.8%. The increase fell below the 2.4% uptick expected by the consensus, and followed last month's unchanged reading.Tomorrow, the January ISM Services Index will be released at 10:00 ET. In notable earnings, ARM Holdings (ARMH 41.95, -0.55) and Toyota Motor (TM 97.83, -0.30) will report their quarterly results ahead of the open.

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