Day Traders Diary


The S&P 500 settled higher by 0.9% despite having to endure early weakness.

The benchmark average spent the first half of today's session attempting to climb above yesterday's afternoon highs. However, the index was unable to clear those levels as its fourth attempt was followed by a steep slide to session lows.

Coinciding with the move was significant greenback weakness as the Dollar Index faced heavy selling pressure into the early afternoon. The Index was down as much 1.8% before bouncing off its 200-day moving average.

Although many currencies were boosted by the dollar selloff, none was greater than the strength of the Japanese yen, which at its best levels was up more than 3.0% against the dollar at 95.89.

The significant movements in the foreign exchange market were followed by chatter suggesting a forced liquidation trade may have been the culprit behind the sharp downdraft in the dollar.

The lows in the Dollar Index occurred at the same time as the lows in equities. Once the noise in currencies subsided, stocks began their afternoon rally. The Dow and S&P received an additional boost from their 50-day moving averages after the early selling pushed the indices below those levels.

The afternoon rally took place as three of the four defensive sectors, health care, utilities, and telecommunication services, registered gains of more than 1.0%. The telecom space was the standout, ending higher by 2.2% as AT&T (T 35.81, +0.55) and Verizon Communications (VZ 49.97, +1.67) added 1.6% and 3.5%, respectively.

Elsewhere, the health care space received a boost from one of its recent laggards, biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 175.18, +4.92) rose 2.9%, but still remains lower by 2.4% in June.

Cyclical sectors were whipsawed early in the session, but the afternoon advance helped five of the six growth-oriented groups register gains.

The outperformance of Wells Fargo (WFC 40.72, +0.90) and other major banks ran the financial sector higher by 1.4%.

Also of note, homebuilders rallied broadly after displaying notable softness over the past few sessions. The iShares US Home Construction ETF (ITB 23.76, +0.70) advanced 3.0%.

Midday selling caused the CBOE Volatility Index (VIX 16.62, -0.88) to spike to 18.51%, its highest level since mid-February, before the near-term volatility measure dipped back into the red in afternoon action.

Today's volatility caused a midday rush into the Treasury complex as the 10-yr yield tested the 2.00% threshold for the first time in two weeks. However, the psychologically important level managed to hold, and the benchmark yield ended the day off 2.5 basis points at 2.075%.

The initial claims level fell to 346,000 for the week ending June 1 from an upwardly revised 357,000 (from 354,000) for the week ending May 25. The consensus expected the initial claims level to drop to 348,000.

For the past few weeks, the initial claims level has bounced around the 350,000 level without showing any signs of picking up traction, up or down. Labor market conditions appear to be stable at a level that is consistent with payroll growth above 150,000.

Tomorrow, all eyes will be turned to the May nonfarm payrolls report, which is scheduled to be released at 8:30 ET. In addition, May nonfarm private payrolls, the unemployment rate, hourly earnings, and the average workweek will all be reported at 8:30 ET. The day's economic news will be topped off by the 15:00 ET report on April consumer credit.

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.