Day Traders Diary


After alternating between gains and losses for 14 straight sessions, the S&P 500 has pulled a hat trick this week. It has now scored gains in every session this week and, boy, the third time was a charm.

The market rallied sharply, bolstered by its confidence in the support of the Federal Reserve and healthy gains in influential leadership groups that helped both the Dow and S&P 500 register all-time intraday highs and closing highs today.

The minutes from the March FOMC meeting were the focal point throughout the session. To begin, they caused a stir after being released early (9:00 a.m. ET) since the Fed discovered they were inadvertently released to 100 Congressional staffers and employees of trade organizations around 2:00 p.m. ET on Tuesday. The matter of their premature release is under investigation, yet the minutes themselves underpinned today's gains.

Several views were expressed in the minutes, but the compilation of those views pointed to a majority view that the Fed should at least start tapering its purchases by the end of the year on the assumption labor market conditions are improved by then. It is important not to forget that what the FOMC decides to do will ultimately be dictated by incoming data. The Fed has been clear on that reminder for a long time. To that end, the minutes also pointed out that a couple of members noted the pace of purchases might appropriately be increased (emphasis our own) if progress toward the committee's economic goals was not maintained.

Our view is that the minutes were supportive for the equity market for the following reasons: "Not many participants want the Fed to stop or to taper purchases without proof that improving economic conditions are sustainable. Therefore, when the time comes it will be against a backdrop of sustained economic improvement that bodes well for consumer and business spending, and earning prospects.
"The minutes are working toward reducing the element of surprise for market participants as it relates to future policy decisions.
"The March nonfarm payrolls report, out after the FOMC meeting, does not fit with the tapering parameters maintained by Fed Chairman Bernanke, Vice Chairman Dudley, and Fed Governor Yellen who will continue to steer the policy directive.
The debate about the inferences of the FOMC Minutes will persist, yet the equity market certainly did not act as if it feared an earlier-than-expected tapering. The major averages moved steadily higher from the sound of the opening bell before leveling off around 1:00 p.m. ET. From that point on, they held in tight trading ranges that left them in close proximity to their best levels of the day by the time the closing bell rang.

Every sector participated in the advance, although the strongst gains were registered by the technology (+1.8%), health care (+1.7%), and industrial (+1.3%) sectors. Separately, the Dow Jones Transportation Average soared 1.8%. The worst-performing group was the energy sector, which was up "only" 0.5%.

There were some pockets of weakness, like the homebuilders, which failed to ride the coattails of the Taylor Morrison Home IPO (TMHC 23.05, +1.05). Gold ($1558.80, -$27.90) was another laggard after Goldman Sachs cuts its price targets for the yellow metal through 2014. Treasuries, meanwhile, were weak with the 10-year Note dropping 15 ticks, bringing its yield up to 1.81%.

By and large, stock monitors were filled with green figures. Advancers outpaced decliners by a 3-to-1 margin at the NYSE and by a nearly 4-to-1 ratio on the Nasdaq. Per usual, there was a volume spike in the final hour that made lackluster volume totals throughout the day look more respectable at the closing bell. In total, 701 mln shares traded hands at the NYSE. That was slightly ahead of yesterday's total, yet it wasn't heavy at all in the context of the breakout move that was made today.

The moderate volume could be interpreted as a sign of reservations ahead of the first quarter earnings reports, which will start flooding in next week. JPMorgan Chase (JPM) and Wells Fargo (WFC), however, report before the open this Friday.

Results from Bed Bath & Beyond (BBBY) will be in focus on Thursday along with the initial claims report for the week ending April 6, which will be released at 8:30 a.m. ET. The consensus estimate for initial claims is pegged at 365,000. 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.