Day Traders Diary


The major averages settled in the red as the S&P 500 lost 0.5% while Nasdaq shed 0.2%.

The three indices hovered near their respective flat lines for the majority of the day before sellers emerged in the afternoon, and drove equities to their first loss in five days.

Nine of ten sectors ended in the red with technology as the lone standout. The sector gained 0.7% and contributed to the outperformance of the Nasdaq. Better-than-expected earnings from Cisco Systems (CSCO 23.89, +2.68), and the relative strength of large components like Apple (AAPL 434.58, +5.73) and IBM (IBM 204.69, +1.37) provided support for the sector.

While technology boosted the Nasdaq, the index was held back by the weakness of biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 180.23, -3.79) fell 2.1% to trim its week-to-date gain to 0.1%. Although the biotech ETF has been the subject of some profit taking following its recent run, it remains higher by 4.6% in May.

Biotechnology also weighed on the health care space, which was the weakest defensively-oriented sector, shedding 1.0%.

Overall, the discretionary sector was the biggest laggard as homebuilders and retailers underperformed. The SPDR S&P Homebuilders ETF (XHB 31.90, -0.54) lost 1.7% after the April housing starts report missed expectations. Meanwhile, the SPDR S&P Retail ETF (XRT 76.93, -0.84) slid 1.1% after Dow component Wal-Mart (WMT 78.50, -1.36) missed on earnings and revenue.

Also of note, the Dow Jones Transportation Average appeared strong in early action, but the bellwether complex declined through the afternoon before ending with a loss of 0.8%.

In the Treasury market, the 10-yr note received notable interest after today's disappointing economic data. As a result, the 10-yr yield declined six basis points to 1.877%.

The CBOE Volatility Index (VIX 13.25, +0.44) ended higher by 3.5%, suggesting downside protection received some interest.

Today's economic data was plentiful, and largely disappointing.

Housing starts fell 16.5% in April to 853,000 from a downwardly revised 1.021 million (from 1.036 million) in March. That was the smallest number of starts since November 2012. The consensus expected housing starts to fall to 970,000.

Multifamily construction, which tends to be highly volatile, fell to 243,000 in April from 398,000 in March. The drop is likely a reversion to the mean as multifamily construction has been running much hotter than its 12-month average.

The initial claims level jumped to 360,000, the highest level since February (excluding the volatility from the Easter holiday problems), for the week ending May 11 from an upwardly revised 328,000 (from 323,000) for the week ending May 4. The consensus expected the initial claims level to increase to 330,000.

The CPI fell 0.4% in April after declining 0.2% in March. The consensus expected consumer prices to fall 0.2%. Excluding food and energy, core CPI increased 0.1% for a second consecutive month. The consensus expected these prices to increase 0.2%.

The Philadelphia Fed's Business Outlook showed that manufacturing activity in the Philadelphia region contracted in May. The index fell to -5.2 from 1.3 in April. The consensus expected the Philly Fed Index to increase to 2.5.

Tomorrow, the preliminary May Michigan Consumer Sentiment Survey and April leading indicators will be reported at 9:55 ET and 10:00 ET, respectively.

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