Day Traders Diary


The S&P 500 settled higher by 0.8%, regaining its 100-day moving average (1640/1641) shortly after the open. The Dow and S&P started the session by chopping around their respective flat lines before the two indices began tracking the Nasdaq, which outperformed with a gain of 1.0%.

This morning, reports from Fox News indicated Senator John McCain was set to oppose the current Syria proposal after saying he would do so if the plan was not forceful enough. However, an afternoon vote containing two McCain amendments passed through the Senate Foreign Relations Committee by a 10-7 vote. The full Senate is expected to have a say on the measure next week.

Stocks slipped from their highs in reaction to the results of the afternoon vote, but still managed to hold the vast majority of their gains. Meanwhile, Treasuries did not reflect much of a safety bid as the complex remained pinned to its lows. The benchmark 10-yr yield ended higher by 5 basis points at 2.894%. More notable was the move in the 2-yr yield, which added four basis points to end at 0.462%, the highest since June 2011.

Nine of ten sectors posted gains with health care (+1.1%) ending in the lead. The sector received significant support from biotechnology as the iShares Nasdaq Biotechnology ETF (IBB 201.38, +3.53) climbed 1.8%.

The outperformance of biotech and technology helped the Nasdaq settle ahead of the other indices. The largest tech component, Apple (AAPL 498.69, +10.11) advanced 2.1% following reports suggesting the company will unveil a new TV set-top box at its September 10 press event.

Today's Nasdaq strength was not an unusual development. The tech-heavy index has outpaced the other indices throughout the third quarter. The index is higher by 7.2% since the end of June while the Dow is essentially unchanged (+0.1%) over that time.

Outside of health care and technology, industrials (+1.0%), materials (+0.9%), telecom services (+1.3%), and discretionary shares (+1.0%) settled ahead of the broader market. The financial sector (+0.8%) was the early leader, but surrendered its spot as the afternoon progressed.

The utilities space (-0.1%) was the lone decliner while consumer staples (+0.5%) and energy (+0.5%) underperformed. On a related note, crude oil slid 1.1% to $107.35 per barrel.

Participation in today's session was in-line with longer-term averages as just under 730 million shares changed hands on the floor of the New York Stock Exchange.

The Federal Reserve's September Beige Book did not send any shockwaves through the market as the central bank struck a familiar tone. The Fed said, "The economy has continued to expand at a modest to moderate pace" while residential real estate activity, "Increased moderately in most Districts." Lending activity was described as "mixed" with little change observed in lending standards.

With regards to employment and inflation, the Fed said hiring "held steady or increased modestly" while upward price pressures "remained subdued."

Today's economic data was limited to the July trade deficit, which widened to $39.1 billion from an upwardly revised $34.5 billion in June (from -$34.2 billion). The consensus expected the deficit to come in at $38.2 billion.

The widening in the deficit resulted from imports increasing $3.5 billion versus June and exports decreasing $1.1 billion. The drop in exports was paced by a $1.6 billion decline in exports of capital goods, excluding automotive, and a $1.36 billion decline in exports of consumer goods, the bulk of which stemmed from a pullback in exports of jewelry, gem diamonds, and artwork, antiques and stamps.

Conversely, imports increased on the back of a near $2.0 billion jump in imports of industrial supplies and materials, a $0.8 billion increase in imports of automotive vehicles, and a $0.7 billion increase in consumer goods, most of which stemmed from imports of artwork, antiques and stamps. The widening in the trade deficit is going to factor negatively in GDP models for the third quarter.

Tomorrow, August Challenger Job Cuts will be reported at 7:30 ET, August ADP Employment Change will cross the wires at 8:15 ET, and weekly initial claims will be released at 8:30 ET. Also at 8:30 ET, revised second quarter productivity and unit labor costs will be reported. The busy day of data will be topped off with the 10:00 ET release of July factory orders and the August ISM Services report. 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.