Day Traders Diary


The major averages saw gains between 1.1% and 1.6% with the Dow Jones and S&P 500 closing at fresh record highs.

Equities registered the bulk of their advance at the open after yesterday's comments from Federal Reserve Chairman Ben Bernanke created some push back against the idea the Fed may begin slowing the pace of its asset purchases at the September meeting.

Mr. Bernanke commented on the economic landscape by saying the current employment level is overstating the health of the job market and that rates may be kept low even after the previously mentioned unemployment threshold of 6.5% is reached.

The comments caused market participants to shift into risk assets and away from the U.S. dollar. The foreign exchange market was the first to respond to the remarks as the greenback weakened against all major currencies. Selling dropped the Dollar Index by nearly 2.0% to 82.40.

Notably, dollar/yen fell almost 200 pips to 98.60 with price action resembling the late-May move attributed to large unwinds of the yen carry trade. The pair was able to rebound into the afternoon, but fell back near its lows before the close. On a related note, some of Chairman Bernanke's comments focused on the carry trade, suggesting that when the Fed doesn't provide any information, "It's very likely that more highly levered, risk-taking positions might build up, reflecting some expectation of an infinite asset purchase program."

Elsewhere, Treasuries received a solid bid following Chairman Bernanke's remarks, sending the 10-yr yield lower by 11 basis points to 2.572%.

The Dow and S&P ended at fresh record highs as growth-sensitive sectors paced the advance. The tech sector (+1.7%) finished atop today's leaderboard, which helped the Nasdaq outperform the other two major averages. Chipmakers displayed significant strength as the PHLX Semiconductor Index added 2.1%.

The tech sector was followed closely by materials and industrials. Producers of basic materials received a significant boost from steelmakers and gold miners. The Market Vectors Steel ETF (SLX 39.84, +1.52) jumped 4.0% and the Market Vectors Gold Miners ETF (GDX 24.97, +1.78) surged 7.7%. Meanwhile, gold futures climbed 3.0% to $1284.50 per troy ounce.

Industrials also displayed broad strength. Transportation-related names provided the sector with solid support as the Dow Jones Transportation Average advanced 1.2%.

However, another commodity-related sector, energy, underperformed with a gain of 0.9%. Crude oil fell 1.8% to $104.62 per barrel, but the energy component remains higher by 11.7% since June 21.

Financials also trailed behind the broader market as the sector added 0.9%. Tomorrow morning, JPMorgan Chase (JPM 55.14, +0.32) and Wells Fargo (WFC 41.89, -0.18) will report their quarterly results ahead of the open.

The initial claims level rose from an upwardly revised 344,000 (from 343,000) for the week ending June 29 to 360,000 for the week ending July 6. The consensus expected the initial claims level to increase to 345,000.

The Department of Labor reported that seasonal adjustment biases from the July 4 holiday may have played a role in the unexpected jump in claims. If this is true, then the initial claims level should fall back below 350,000 next week.

Separately, export prices, excluding agriculture, decreased by 0.2% in June after they had decreased 0.7% during the prior month. Excluding oil, import prices declined 0.3%, which follows last month's decline of 0.3%.

The June Treasury Budget showed a surplus of $116.5 billion, which was slightly ahead of the surplus of $115.0 billion expected by the consensus.

Tomorrow, June PPI and core PPI will be reported at 8:30 ET while the preliminary University of Michigan Consumer Sentiment Survey for July will be released at 9:55 ET. 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.