Day Traders Diary


Unlike Friday, the stock market didn't provide a lot of trading excitement today. The major indices spent time on either side of the unchanged mark, but were never able to achieve a good deal of separation either way as buyers and sellers alike lacked conviction.

There was some initial excitement when it was announced before the open that Standard & Poor's raised its US outlook to Stable from Negative, citing a lessening of downside risks to its AA+ rating for US sovereign debt. That positive-sounding headline helped stocks get off to a decent start, yet buying efforts soon tapered off as a concurrent rise in long-term interest rates seemed to limit the stock market's enthusiasm for the outlook change. The yield on the 10-year note moved up to 2.23%, or roughly six basis points higher than where it settled on Friday.

The move was striking considering the switch by Standard & Poor's should have been construed as a good thing for the Treasury market. The ensuing weakness, though, seemed to fit with the sense that an improving economic outlook would lessen the safety premium in Treasuries and encourage a rotation into stocks. Nonetheless, not all participants are convinced that the economy will gain steam in coming months; hence, there were some underlying concerns that the jump in rates could retard the recovery as they interfere with the rebound in the housing market. To that end, the SPDR S&P Homebuilders ETF (XHB 30.26, -0.25) dropped 0.8% today.

The S&P Utilities sector, which is another rate-sensitive area, slipped 0.2% and was a relative laggard in the sector rankings. Indicative of today's lackluster trading action, there wasn't a single sector that moved up, or down, more than 1.0%. The big winner was telecom services, which gained 0.8%, while the energy, industrial, and consumer discretionary sectors all tied on the losing end of things with a 0.3% decline.

Apple (AAPL 438.89, -2.92) was the story stock of the day as attention turned to the company's Worldwide Developers Conference. Shares of AAPL traded higher for most of the session, but rolled over late as the announcement of iOS 7 and iRadio were greeted in a ho-hum manner.

Dow component McDonald's (MCD 99.51, +1.23) enjoyed a better fate, having started strong and remaining strong on news its global comparable-store sales increased a better-than-expected 2.6% in May. The gains in McDonald's, though, weren't enough to keep the Dow from incurring a small loss as a drop in higher-priced IBM (IBM 205.02, -1.33) and 3M (MMM 110.81, -0.30) were offsetting influences.

There wasn't any economic data out of the US today, but St. Louis Fed President Bullard did address economic conditions in a speech on the global economy. Mr. Bullard is a voting FOMC member and he walked the party line of providing a little something for everyone in the tapering debate. To wit, he suggested the low rate of inflation could be justification for the Fed to maintain its aggressive asset buying over a longer time frame and then added that an improved labor market could mean the Fed might slow the pace of its asset purchases.

The Wholesale Inventories report for April ( consensus +0.2%; prior +0.4%) is the only piece of US data slated for release on Tuesday. It won't be a market mover, so the direction of currencies and interest rates could be dictating factors along with any new insight from Germany's Constitutional Court on the legality of the eurozone's crisis-management measures.

Today's volume was light with just 595 mln shares changing hands at the NYSE.

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