Day Traders Diary


April 5, 2013
The major averages ended today's session with modest losses. The S&P 500 shed 0.4% while the tech-heavy Nasdaq lost 0.7%.
The bulk of today's selling occurred at the open as three points of concern sent investors in search of safety. Headlines from Asia indicated North Korea has not toned down its war rhetoric and South Korean officials confirmed that the North has moved a pair of mid-range missiles to its east coast.
In addition to the Korean concerns pressuring the broader market, disappointing second quarter guidance from F5 Networks (FFIV 73.21, -17.21) contributed to the relative weakness of the tech sector, which ended as the day's biggest laggard.
While the two items pressured index futures in pre-market trade, a disappointing March nonfarm payrolls report ensured a sharply lower start to the cash session.
Nonfarm payrolls added just 88,000 new jobs in March. That was down from an upwardly revised 268,000 (from 236,000) additions in February and was the smallest increase in jobs since June 2012. The consensus expected payrolls to add 192,000 jobs.
Although the three headwinds caused the S&P 500 to start lower by 1.3%, the benchmark average notched its lows during the opening minute before spending the remainder of the day in a steady climb.
The morning developments sparked a safety bid across the Treasury complex. As a result, the 10-yr yield fell to its lows before recovering three basis points into the close. However, Treasuries ended near their best levels of the week with the 10-yr yield down 17 basis points at 1.70%.
The technology sector felt the brunt of today's selling pressure as F5 Networks' cautious guidance weighed on other networking companies. In addition, large cap tech names saw outsized losses as well. The largest tech component, Apple (AAPL 423.20, -4.52), lost 1.1%, and settled near its 52-week low. Notably, chipmakers underperformed in early trade, but finished the day ahead of the tech sector. The PHLX Semiconductor Index shed 0.5%.
Although growth-oriented sectors were among the biggest decliners in early trade, those groups were able to climb off their lows. Financials, industrials, and materials outperformed the defensively-minded consumer staples and health care sectors.
It should be noted that health care and consumer staples are the top performing sectors year-to-date, therefore some profit taking may have played a part in their underperformance today.
On the upside, telecoms and utilities settled in the black. The SPDR Utilities Select Sector ETF (XLU 39.57, +0.17) added 0.4%, and was the top performing sector ETF as investors sought higher-yielding equities.
While the broader market finished well off its lows, the Dow Jones Transportation Average was able to stage a stunning reversal. The bellwether complex was down as much as 2.2% at the start of the session before ending with a gain of 0.5%. Truckers were among the top index performers as Con-way (CNW 34.01, +0.96) advanced 2.9%.
Looking back at the day's final sector performance, technology (-1.0%), consumer staples (-0.7%), and health care (-0.6%) were among the biggest laggards. Meanwhile, utilities (+0.4%), telecom (+0.4%), energy (UNCH), and industrials (-0.2%) outperformed.
Reviewing today's remaining economic data, private nonfarm payrolls rose 95,000, but that was still well below consensus forecasts (210,000), and what was added in February (254,000).
The unemployment rate dipped to 7.6% in March from 7.7% in February. The decline in the unemployment rate, however, was not due to job growth. The labor force participation rate dropped to levels not seen since the late 1970s and caused the unemployment rate to decline. If the labor force participation rate had remained at February levels, the unemployment rate would have increased to 7.9%.
The U.S. trade deficit narrowed in February, dropping from $44.5 billion in January to $43.0 billion. The consensus expected the deficit to increase slightly to $44.7 billion.

Consumer credit increased by $18.1 billion in February after increasing a downwardly revised $12.7 billion (from $16.2 billion) in January. The consensus expected consumer credit to increase by $14.0 billion.

April 4, 2013

U.S. equity futures have slid off their highs and the S&P 500 futures are now flat.
The major Asian bourses ended mostly lower as a flare-up in tensions with North Korea offset the Bank of Japan's increase to its bond buying scheme. Yesterday, the United States announced it was moving a missile defense system to Guam before it was reported the North Korean army had received the ok to launch a nuclear attack against the United States. Overnight headlines out of North Korea warned "The moment of explosion is approaching fast." Meanwhile, the Bank of Japan meet for the first time under the leadership of Governor Kuroda, and doubled its bond buying scheme to JPY7.5 trillion a month in maturities up to 40 years while also indicating it will double its holdings of JGBs and ETFs in two years in an effort to increase the monetary base at an annual rate of JPY60-70 trillion. Markets in China and Hong Kong were closed for Tomb Sweeping Day. Data out overnight saw Australian building permits jump 3.1% month-over-month (2.4% expected) and retail sales climb 1.3% month-over-month (0.3% expected) while Thai consumer confidence ticked up to 84.8 (84.0 previous).
In Japan, the Nikkei gained 2.2% after the Bank of Japan's action as trade threatens the March highs. Real estate and financial names saw strong gains as Sumitomo Realty & Development surged 10% and Sumitomo Mitsui Financial jumped 7.4% to lead their respective sectors higher. Exporters were also a beneficiary of the buying as Honda Motor added 3.4%.
Hong Kong's Hang Seng was closed.
In China, the Shanghai Composite was closed as well.
European markets are generally higher following the release of a slew of Services PMI readings. France's Services PMI slipped to 41.3 from prior month's 41.9 (41.9 consensus). Germany's Services PMI declined to 50.9 from last month's 51.6 (51.6 consensus). The United Kingdom's Services PMI rose to 52.4 from the prior month's 51.8 (51.5 consensus). Italian Services PMI climbed to 45.5 from the 43.6 reported last month (43.5 consensus). Spanish Services PMI hit 45.3, up from the 44.7 reported a month ago (44.2 consensus). As a result of the mixed regional PMI readings, the Eurozone Services PMI slipped to 46.4 from last month's 46.5. The general consensus had expected the reading to remain unchanged.
In today's central bank action, the European Central Bank left its key interest rate unchanged at 0.75%, as expected. Elsewhere, the Bank of England also left its key interest rate and asset purchase program unchanged at their respective 0.50% and GBP375 billion.
In news, the Chief Executive Officer of Italy's Unicredit said the bank saw no deposit shifts since the Cyprus crisis began. In addition, the CEO said he believes it is "acceptable" to bail-in uninsured depositors.
The United Kingdom's FTSE is off by 0.6% with media names showing notable weakness. ITV and Reed Elsevier are down 3.2% and 3.6%, respectively.
In Germany, the DAX is rising 0.2% with defensive health care and utilities outperforming. Fresenius Medical trades higher by 4.0% and E.ON is firmer by 2.2%.
France's CAC is adding 0.5% with automaker Renault leading the way, up 3.8%.

April 2, 2013

Equities spent the bulk of today's session near their highs before a late afternoon stumble dropped the S&P 500 back near the middle of its range. As a result, the benchmark average finished higher by 0.5%.
Notably, the Russell 2000, which tracks small cap stocks, ended lower by 0.5% after losing more than 1.0% yesterday.
Equities began today's session with solid gains amid an upbeat European trade. The overseas advance followed the release of several Manufacturing PMI readings across the eurozone. Although most reports exceeded expectations, all five remained below 50, signifying an ongoing contraction.
Domestically, the health care sector showed strength out of the gate with managed care stocks jumping after the Centers for Medicare and Medicaid Services said 2014 Medicaid Advantage and prescription drug benefit rates will increase by 3.3%. Dow component UnitedHealth Group (UNH 61.74, +2.77) gained 4.7% while the broader SPDR Health Care Select Sector ETF (XLV 46.74, +0.67) rose 1.5%.
The health care sector was not the only defensively-minded space which outperformed the broader market. Consumer staples and telecoms finished among the session leaders as well.
One cyclical group which finished among the leaders was the consumer discretionary sector. Apparel stocks provided support after Urban Outfitters (URBN 39.87, +1.46) gave an optimistic update on its first quarter sales.
Elsewhere in the discretionary space, Ford Motor (F 13.01, +0.11) and General Motors (GM 27.93, +0.13) settled with respective gains of 0.9% and 0.5% after reporting their monthly sales. In March, Ford saw its sales climb 6.0% to 236,160 vehicles while General Motors reported an increase of 6.4% to 245,950 units.
While discretionary shares ended firmly higher, the same could not be said for other growth-sensitive sectors.
Producers of basic materials saw a continuation of their recent weakness. Downbeat trade in steelmakers caused the Market Vectors Steel ETF (SLX 41.87, -1.06) to lose 2.5% while the broader SPDR Materials Select Sector ETF (XLB 38.46, -0.38) fell 1.0%. Since March 14, the sector ETF is down almost 4.0% while the S&P 500 is little changed over that time.
While materials spent the entire session in negative territory, intraday weakness sent the industrial sector to its lows, where it settled for the day. Transportation-related stocks contributed to the sector's softness, and the Dow Jones Transportation Average lost 1.2%. Airlines pressured the 20-stock complex after Delta (DAL 14.94, -1.31) trimmed its guidance, citing the sequester as one of the reasons for lower targets.
Trading volume was below average once again as 640 million shares changed hands on the floor of the New York Stock Exchange.
Looking back at the final sector performance, health care (+1.4%), consumer staples (+1.1%), and consumer discretionary (+0.9%) paced the advance while materials (-0.9%), energy (-0.5%), and industrials (-0.1%) weighed.
Reviewing today's economic data, manufacturing orders rose 3.0% in February after declining an upwardly revised 1.0% (from -2.0%) in January. The consensus expected manufacturing orders to increase 2.6%.
Durable goods orders were revised down slightly from a 5.7% gain to 5.6%. A 75.0% increase in aircraft sales accounted for nearly the entire increase. Excluding transportation, durable goods orders fell 0.7%, which was slightly worse than the originally reported 0.5% decline.
Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET. In addition, March ADP Employment Change and ISM Services will be released at 8:15 ET and 10:00 ET, respectively.

April 1, 2013

The major averages ended near their lows, and the S&P 500 lost 0.5%.
With European markets shuttered for Easter Monday, equities saw little change at the start of today's session. However, that changed quickly once the March ISM Index was reported below expectations. The Index was reported at 51.3, which was its lowest reading since December, and it sent the major averages to their lows with cyclical sectors pacing the decline.
In addition to the disappointing ISM report, weaker-than-expected manufacturing PMI readings out of China and a cautious Tankan Survey reported in Japan put growth concerns back on the minds of investors.
Those concerns were reflected by the weakness of industrials and materials. The two growth-oriented sectors finished as the weakest performers with industrials registering the widest decline.
The SPDR Industrial Select Sector ETF (XLI 41.25, -0.51) fell 1.2%. Transportation-related stocks did their part in pressuring the space as the Dow Jones Transportation Average ended lower by 1.5%.
All 20 stocks comprising the Transportation Average settled in the red, and truckers were among the weakest performers. Ryder System (R 58.67, -1.08) and Landstar (LSTR 55.71, -1.38) saw respective losses of 1.8% and 2.4%.
Elsewhere, producers of basic materials saw an extension of their recent softness. The SPDR Materials Select Sector ETF (XLB 38.84, -0.34) ended lower by 0.9%, which trimmed its year-to-date gain to 3.2%. Note that the materials sector has been the worst performing group so far in 2013.
On a related note, copper continued showing weakness with its price sliding 0.9% to $3.372 per pound. The metal, widely considered to be a global economic bellwether, ended today's session at levels last seen in August of last year.
The technology sector also ended among today's biggest declines. Large cap tech names saw mixed performance but the largest sector component, Apple (AAPL 428.91, -13.75), fell 3.1%. Also of note, high-beta chipmakers lagged notably and the PHLX Semiconductor Index dropped 2.0%.
On the upside, defensive sectors saw slimmer losses than the broader market with telecom services ending in positive territory due to the relative strength of AT&T (T 37.25, +0.56).
With equities ending near their lows, the CBOE Volatility Index (VIX 13.62, +0.92) settled near its highest level of the day. The near-term volatility climbed over 7.0%, suggesting downside protection received some buying interest during today's session.
Looking back at the final sector performance, industrials (-1.1%), technology (-1.0%), materials (-1.0%) and consumer discretionary (-0.8%) all trailed behind the broader market. Meanwhile, telecom (+0.8%), health care (+0.2%), and consumer staples (UNCH) outperformed.
Today's volume represented the third lowest total of the year as 575 million shares changed hands on the floor of the New York Stock Exchange.
Reviewing today's economic data, construction spending rose 1.1% in February after falling 2.1% in January. The consensus expected construction spending to rise 0.9%. Private construction spending increased 1.3% after declining 3.1% in January. Public spending increased 0.9%, up from a 0.2% gain in January.
The ISM Manufacturing Index dropped to 51.3 in March from 54.2 in February ( consensus 54.0). That was the first drop since November, and should not have been too surprising given the mixed March regional manufacturing surveys. New order levels softened as the related index fell from 57.8 in February to 51.4 in March. In addition, order backlogs also weakened, from 55.0 to 51.0.
In tomorrow's economic data, February factory orders will be reported at 10:00 ET and automakers will be reporting their March sales throughout the day.

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.