Day Traders Diary


The S&P 500 settled lower by 1.2% after spending the entire session in negative territory.

Equities began the day on a lower note amid mixed housing data and hovered near their lows ahead of the Fed's minutes.

Stocks then fell to fresh lows after the minutes indicated Committee members saw little change to the economic outlook. Along those lines, memberswith the exception of Esther Georgemaintained their support for the continuation of highly accommodative policy.

Homebuilders were under pressure after Toll Brothers (TOL 33.56, -3.34) reported its quarterly results this morning. The builder missed on earnings and revenue, but saw an increase to its backlog. In addition, the company raised its full-year 2013 gross margin guidance during its earnings call.

Homebuilders sold off in reaction to Toll's earnings and afternoon weakness pushed builder stocks further into the red. Peers PulteGroup (PHM 18.60, -1.35) and D.R. Horton (DHI 21.92, -1.37) were off 6.8% and 5.9% respectively.

Elsewhere among discretionary shares, Office Depot (ODP 4.18, -0.84) and OfficeMax (OMX 12.09, -0.91) announced the completion of their stock-for-stock merger. Competitor Staples (SPLS 13.60, -1.05) fell 7.2% on the news.

As a result of today's selling, six of 10 S&P 500 sectors lost over 1.0%. Energy and materials were the weakest performers in early trade, and continued lower during the afternoon. The energy sector saw some pressure from crude oil, which fell 2.4% and settled just under $95.00.

Elsewhere, materials underperformed as industrial and precious metals displayed notable weakness for the second consecutive session. In addition, chemical producer CF Industries (CF 207.07, -11.46) fell 5.2% after missing on the top line.

The tech space was another notable laggard. The largest sector component, Apple (AAPL 448.85, -11.14) lost 2.4% after reports indicated Foxconn, which assembles Apple products, has instituted a hiring freeze. However, the initial report was followed by stories suggesting the hiring freeze may not be related to changes in demand for Apple products. Instead, Foxconn could be making adjustments to better suit other companies it conducts business with.

The first half of the session saw outperformance from defensively-oriented consumer staples, telecoms, and utilities. Though these sectors succumbed to broad pressure in afternoon trade, they settled with slimmer losses than the broader market.

Today's sell-off stirred up some demand for downside protection. This was reflected by the CBOE Volatility Index (VIX 14.62, +2.31), which surged over 15.0%. In the futures market, VIX contracts saw buying interest as well with the largest moves apparent in front-month contracts.

Volume was well above average today as 816 million shares changed hands on the floor of the New York Stock Exchange.

Taking a final look at the day's S&P 500 sector alignment, materials (-2.8%), energy (-1.8%), consumer discretionary (-1.6%), and technology (-1.5%) stocks were among the biggest laggards. Meanwhile, consumer staples (-0.1%), telecoms (-0.2%), and utilities (-0.2%) withstood the brunt of the selling.

Looking back at today's economic data, January housing starts were reported at an annualized rate of 890,000 units, which fell short of the 914,000 expected by the consensus. However, the prior month's reading saw a substantial upward revision.

Additionally, building permits beat expectations and rose to 925,000. This report is seen as a leading indicator suggesting demand for new homes remains intact.

Tomorrow's economic data will be plentiful. At 8:30 ET, weekly initial and continuing claims, January CPI, and core CPI will all be released. Meanwhile, January existing home sales, leading indicators, and February Philadelphia Fed Survey will all be reported at 10:00 ET.

All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.