Day Traders Diary


The S&P 500 settled higher by 0.4% despite enduring a first-hour selloff.

Equities began the session with modest gains after upbeat data from China helped ease some concerns regarding the pace of global growth. The Middle Kingdom reported an increase in exports (+5.1% actual, +3.0% expected) and imports (+10.9% actual, +2.1% forecast) while its trade surplus narrowed to $17.82 billion from $27.10 billion.

Shortly after the start of the session, the S&P notched a high of 1,700.20 before aggressive selling pressured the benchmark index back to its flat line. The slide coincided with notable dollar/yen weakness that sent the pair below 96.00 for the first time since June 19.

The slide in equities and dollar/yen was halted shortly after the first hour of action. Stocks then returned to their highs but the S&P was unable to reclaim the 1,700 level.

The rebound took place as most cyclical sectors outperformed with materials in the lead. The sector advanced 1.5% as the Chinese data underpinned steelmakers and miners. The Market Vectors Steel ETF (SLX 42.29, +1.20) jumped 2.9% and the Market Vectors Gold Miners ETF (GDX 26.00, +2.06) surged 8.6%. On a related note, gold futures rose 2.1% to $1311.80 per troy ounce and copper futures added 2.8% to $3.263 per pound.

Other commodity-related sectors also rallied. Industrials settled higher by 0.4% and Dow component Caterpillar (CAT 83.96, +1.53), which does a good portion of its business in China, climbed 1.9%.

Elsewhere, the energy sector ended with a gain of 0.6% even as crude oil slumped 0.5% to $103.85 per barrel.

Discretionary shares also contributed to the rebound as retailers outperformed. The SPDR S&P Retail ETF (XRT 81.53, +0.75) posted a gain of 0.9% after retailers reported their same store sales for July. L Brands (LTD 60.25, +2.95) added 5.2% after surpassing estimates while Costco (COST 117.39, -1.95) slipped 1.6% after missing expectations.

Although most cyclical sectors registered gains, financials trailed behind the broader market. JPMorgan Chase (JPM 54.83, -0.47) shed 0.9% after the company said it is being investigated by the U.S. Attorney's Office for Eastern District of California over its mortgage-backed securities offerings.

Treasuries were trapped inside of a narrow range and the benchmark 10-yr yield shed two basis points to 2.59%.

In today's economic data, the initial claims level increased from an upwardly revised 328,000 (from 326,000) for the week ending July 27 to 333,000 for the week ending August 3. The consensus expected the initial claims level to increase to 340,000. Even though the claims level increased this week, the headline number is actually a strong positive sign for the labor market.

Throughout July, the initial claims data were distorted by seasonal adjustment problems from the motor vehicle industry. The Department of Labor announced that this week's claims data were unaffected by seasonal biases. That means the initial claims, which were around 350,000 prior to the distortions, actually improved throughout July.

Tomorrow, June wholesale inventories will be reported at 10:00 ET.

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