Day Traders Diary


The S&P 500 added 0.2% as eight of ten sectors posted gains. The session kicked off on a lower note, but still managed to finish in positive territory despite an afternoon stumble.

Prior to the open, investors received the news that second quarter GDP was revised up to 2.5% from 1.7%. The consensus expected the reading to be revised to 2.1%. Real final sales were revised up to 1.9% from 1.3%.

Overall, the upward revision to GDP growth does not suggest that the underlying currents of weak growth are ending. Almost the entire upward revision came from a stronger-than-originally reported trade deficit, which is likely to reverse in the third quarter. That means the increase in GDP pulled potential growth from the third quarter into the second and was not the result of a strengthening economic situation.

Following the report, equity futures and Treasuries fell to their lows while the Dollar Index jumped to its high in a reaction consistent with increased tapering expectations. As the session dragged on, stocks displayed intraday strength, but slipped into the close while Treasuries erased their losses. The benchmark 10-yr yield slipped three basis points to 2.75%. For its part, the Dollar Index held its gains throughout the session, ending near 82.00.

Telecom services finished in the lead as the sector advanced 1.2%. Verizon (VZ 47.82, +1.26) provided considerable support after reports indicated the company has resumed talks with Vodafone (VOD 31.80, +2.39) about acquiring Vodafone's 45.0% stake in Verizon Wireless.

Technology also displayed notable strength as top-weighted components like Google (GOOG 855.43, +6.88) and Microsoft (MSFT 33.55, +0.53) climbed 0.8% and 1.6%, respectively. High-beta chipmakers also rallied as the PHLX Semiconductor Index rose 1.2%.

The outperformance of technology combined with strength among biotechnology companies helped the Nasdaq (+0.8%) finish well-ahead of the broader market. Today's advance helped the tech-heavy index trim its August loss to 0.2%.

Equities slipped during the final hour of action amid comments from St. Louis Fed President Jeffrey Lacker who said, "Conditions for tapering QE have been met." Technical factors may have also played a part in the afternoon retreat as the S&P was pressured back below its 100-day moving average, where it settled.

On the downside, energy (-1.1%) and utilities (-0.5%) were the only two decliners. Weighing on energy shares was crude oil, which tumbled 1.9% to $107.98 per barrel. Meanwhile, high-yielding utilities were unable to catch a bid even as traders moved back into Treasuries. With tomorrow being the final session of the month, the utilities space is poised to finish August behind the remaining nine sectors with a loss of 5.6%.

Participation remained light with trading volume rivaling that of Monday as less than 550 million shares changed hands on the floor of the New York Stock Exchange.

Looking back at today's remaining data, the initial claims level fell to 331,000 for the week ending August 24 from an upwardly revised 337,000 (from 336,000) for the week ending August 17. The consensus expected the initial claims level to drop to 330,000.

It seems that the initial claims level has stabilized at roughly 330,000 following a volatile July when seasonal adjustment biases made it difficult to examine layoff trends. This level signifies a sizable reduction from where claims were at the beginning of the summer and suggests a solid improvement in labor conditions.

Tomorrow, July personal income, personal spending, and core PCE prices will all be reported at 8:30 ET. The August Chicago PMI report will cross the wires at 9:45 ET and the final reading of the August Michigan Consumer Sentiment Survey will be released at 9:55 ET.
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