Day Traders Diary


The major averages registered gains after a final hour rally pushed the S&P 500 and Nasdaq to their highs. For its part, the Dow ended flat.

Quarterly earnings were in focus this morning after JPMorgan Chase (JPM 54.97, -0.17) and Wells Fargo (WFC 42.63, +0.74) announced their results. Both banks reported bottom-line beats on in-line revenues. However, JPMorgan Chase saw a 7.0% quarter-over-quarter decrease in mortgage originations while Wells Fargo reported a 2.7% increase. The results provided support for other bank shares and the financial sector settled atop the sector leaderboard with a gain of 0.5%.

Discretionary shares also outperformed the broader market as online retailers displayed strength. (AMZN 307.55, +7.89) jumped 2.6% and shares of the online auction site eBay (EBAY 57.04, +1.16) advanced 2.1%. However, traditional retailers did not fare as well and the SPDR S&P Retail ETF (XRT 80.81, -0.20) shed 0.3%.

Equities slipped to their lows following comments from Philadelphia Fed President Charles Plosser, who said the Federal Reserve should begin reducing the pace of its asset purchases in September and end the program by year's end. Mr. Plosser followed those remarks by saying the Fed does not "want to create another housing boom."

Shortly after Mr. Plosser's comments, St. Louis Fed President James Bullard reiterated his opposition to dialing down the stimulus. It should be noted Mr. Bullard is a voting member of the Federal Open Market Committee this year while Mr. Plosser will not have a vote until next year.

Early afternoon action saw the health care sector jump to fresh highs after Bloomberg reported Roche Holdings (RHHBY 64.00, -0.12) is seeking financing for a potential takeover of Alexion Pharma (ALXN 114.26, +12.82). The news also provided a boost to biotech names, sending the iShares Nasdaq Biotechnology ETF (IBB 193.03, +4.66) to its session high.

On the downside, the industrial sector was pressured by the underperformance of two large components. United Parcel Service (UPS 86.12, -5.33) fell 5.8% after issuing cautious second quarter and full year earnings guidance due to a slowing US industrial economy. This also weighed on the Dow Jones Transportation Average, which slumped 0.6%.

In addition, Dow component Boeing (BA 101.87, -5.01) tumbled on heavy volume after a fire took place aboard a 787 Dreamliner at London's Heathrow Airport. Shortly after the news broke, separate reports indicated a Florida-bound 787 was forced to return to its home port in Manchester, U.K. due to a technical issue.

The materials sector also finished among the laggards after pacing yesterday's advance. Steelmakers underperformed and the Market Vectors Steel ETF (SLX 39.06, -0.78) fell 2.0%.

Today's economic data revealed the largest increase in producer prices since September 2012 due to an unexpected jump in energy prices. June PPI rose 0.8%, up from a 0.5% gain in May, and well above the consensus expectation of a 0.3% rise. The energy index rose 2.9% in June after increasing 1.3% May. That is the biggest monthly increase since February. The pickup in energy costs was due to a 7.2% increase in gasoline prices.

Excluding food and energy, core prices remain on a weak trend. Prices increased 0.2% in June after increasing 0.1% in both April and May. The consensus expected these prices to increase 0.1%.

The preliminary reading of the July University of Michigan Consumer Sentiment Index softened a bit and fell from 84.1 in June to 83.9 (85.0 consensus). While employment levels have generally strengthened over the past few weeks, recent volatility in the stock market coupled with increases in oil and gasoline prices likely reduced overall sentiment levels.

The Current Conditions Index rose to 99.7 in July from 93.8 in June. That is the highest level since July 2007. Meanwhile, consumers became more concerned about the future. The Expectations Index fell to 73.8 in July from 77.8 in June.

On Monday, June retail sales, retail sales ex-auto, and the July Empire Manufacturing Index will be reported at 8:30 ET while the May business inventories report will cross the wires at 10:00 ET.

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