Day Traders Diary


The major averages settled with modest gains despite an afternoon stumble. The S&P 500 climbed 0.5% to bring its week-to-date gain to 1.5%.

Equities opened in the red as domestic and foreign economic data reminded investors of a cloudy growth picture. However, the opening strength of defensive sectors quickly overshadowed the early losses, and helped the broader market erase its early weakness.

Consumer staples and utilities outperformed throughout the session as the two sectors settled with respective gains of 1.0% and 0.8%.

The health care space lagged behind its defensively-geared counterparts as biotechnology became the subject of some profit taking following its recent run. The iShares Nasdaq Biotechnology ETF (IBB 184.02, -2.16) settled lower by 1.2%, but is still up 6.7% in May, and higher by 2.1% this week alone.

The underperformance of biotech weighed on the Nasdaq, which trailed the other two major indices throughout the session. In addition, Apple's (AAPL 428.85, -15.01) largest decline in nearly a month also exerted pressure on the Nasdaq as well as the technology sector, which ended with a slim gain. Another large sector component Google (GOOG 915.89, +28.79) rose 3.3% after the company unveiled a music streaming service at its I/O developers conference in San Francisco.

Most other cyclical groups were somewhat shaky as the energy space spent the day in negative territory. Crude oil was down as much as 2.0% before recovering those losses to end little changed at $94.30.

Elsewhere, industrials were pressured by cautious third-quarter revenue guidance from Deere (DE 89.64, -4.13). The machinery manufacturer lost 4.4%, but the relative strength of transportation-related names kept the industrial sector from falling too far behind the broader market.

The Dow Jones Transportation Average rose 0.8% to notch another record high as airlines soared. Southwest Air Lines (LUV 14.34, +0.36) gained 2.6% after hiking its quarterly dividend to $0.04 from $0.01 and announcing a $500 million increase to its share repurchase authorization.

The financial sector was the only growth-sensitive group which remained strong throughout the day. Major banks registered gains across the board as the sector added 0.9%. The group has been the best performer this week, climbing 3.0%.

This morning's economic data was plentiful as April producer prices declined 0.7%, which was cooler than the downtick of 0.5% forecast by the consensus. Meanwhile, core producer prices rose 0.1%, in-line with the consensus.

Industrial production fell 0.5% in April after increasing a downwardly revised 0.3% (from 0.4%) in March. The consensus expected industrial production to decline 0.2%.

Manufacturing production declined 0.4% in April after declining 0.3% in March. The drop was in-line with the weakness reported in nearly all of the regional manufacturing surveys. Durable and nondurable goods manufacturing fell 0.6% and 0.1%, respectively.

The rate of capacity utilization fell to 77.8% from a downwardly revised 78.3% (from 78.5%) in March. That is the lowest level of capacity utilization since January. Manufacturing capacity utilization dropped to 75.9%, which is the first time since November 2012 that the utilization rate slipped below 76%.

Separately, the Empire Manufacturing Survey for May registered a reading of -1.43, which was down from the prior month's reading of 3.1. Economists polled by had expected that the survey would rise to 3.5.

The May NAHB Housing Market Index was unchanged at 44. Today's report was in line with the consensus.

Another busy day of economic data reporting is setting up for tomorrow. Weekly initial claims, April CPI, core CPI, housing starts, and building permits are all scheduled for an 8:30 ET release. This will be topped off by the May Philadelphia Fed Survey, which is set to cross the wires at 10:00 ET.

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