Day Traders Diary


The major averages ended August on a lower note as the S&P 500 shed 0.3% while the Nasdaq fell 0.8%. Small caps endured a rough session with the Russell 2000 falling 1.6%.

With the Labor Day weekend ahead and the likelihood of military action in Syria also looming, participation was very limited before quarterly MSCI rebalancing added more than a 100 million shares to the final volume tally as 768 million shares changed hands on the NYSE floor.

Equities fell to their lows midway through the session when Secretary of State John Kerry commented on the Syrian situation, implying the U.S. will act alone if necessary. The S&P followed its quick slide to lows with a recovery to its prior levels, where it settled.

Eight of ten sectors ended in the red with influential cyclical groups weighing on the broader market. Financials, technology, industrials, and discretionary shares lost between 0.5% and 0.7% with the discretionary sector leading to the downside.

Nearly all discretionary components posted losses. Home builders settled on their lows as the iShares Dow Jones US Home Construction (ITB 20.56, -0.40) fell 1.9%. Retailers also slumped as the SPDR S&P Retail ETF (XRT 77.88, -0.59) lost 0.8%. Big Lots (BIG 35.42, +0.78) bucked the trend among retailers, climbing 2.3% after reporting a bottom-line beat.

Elsewhere, the industrial sector succumbed to the pressure exerted by transportation companies as the Dow Jones Transportation Average fell 1.1%.

On the upside, consumer staples added 0.3% and the weakest sector of the month, utilities, tacked on a slim gain of less than 0.1%.

While buying interest was somewhat scarce, the CBOE Volatility Index (VIX 16.95, +0.14) rose 0.8% as participants demanded some downside protection. The near-term volatility measure ended August at its highest level since early July after starting the month near its 2013 lows.

Treasuries spent the session within a narrow range and the benchmark 10-yr yield slipped one basis points to 2.75%.

Reviewing today's economic data, personal income increased 0.1% in July, down from a 0.3% increase in June and exactly what the consensus expected. Employee compensation fell 0.2% as wages and salaries declined by 0.3%. That pullback was in-line with the July employment report, which showed aggregate earnings down 0.3% in July. The drop in compensation was offset by a 0.7% increase in receipts on assets, which was primarily driven by equity gains.

Spending levels were weak. Consumption grew 0.1% in July after increasing an upwardly revised 0.6% (from 0.5%) in June. The consensus expected personal spending to increase 0.3%.

The Chicago PMI increased to 53.0 in August from 51.6 in July. That was exactly what the consensus expected. Production levels weakened slightly as the index fell from 53.6 in July to 53.0 in August. The drop in production, however, was not related to a pullback in orders. New orders increased in August to 57.2, which is the highest level since May. Order backlogs remained in contraction for a third consecutive month, but improved from 42.9 in July to 46.5 in August.

Lastly, consumer sentiment was revised up to 82.1 in the final reading of the August University of Michigan Consumer Sentiment Index from 80.0 in the preliminary reading. The upward revision still leaves sentiment below the 85.1 reading in July. The consensus expected the Consumer Sentiment Index to remain at 80.0. 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.