Day Traders Diary


The S&P 500 registered its first September decline, shedding 0.3% as nine of ten sectors ended in the red. After posting gains in each of the past seven sessions, several of this month's top performers fell victim to some profit-taking.

Financials, industrials, and materials led to the downside with losses ranging between 0.5% and 1.0%. The financial sector was pressured by the underperformance of most large banks as investors attempted to gauge the impact of a slowdown in the mortgage industry after US Bank (USB 36.87, +0.19) announced that its mortgage revenue fell roughly 20% in the third quarter. JPMorgan Chase (JPM 52.24, -1.02) was the weakest performer among the majors while the broader sector lost 0.7%.

Elsewhere, the industrial sector slid 0.5% as transportation companies displayed broad weakness. The Dow Jones Transportation Average fell 1.1% as 18 of 20 components ended lower.

Crude oil's continued strength may have also acted as a drag on transports with the energy component advancing 1.0% to $108.67 per barrel.

Although oil settled higher, the rest of the commodity complex did not fare nearly as well. Copper (-1.5%, $3.21/lb), gold (-3.0%, $1323.40/oz t), and silver (-5.5%, $21.91/oz t) futures were pressured throughout the day. Similarly, miners and steelmakers lagged as the Market Vectors Gold Miners ETF (GDX 25.29, -1.50) fell 5.6% and the Market Vectors Steel ETF (SLX 45.30, -0.54) lost 1.2%. The materials sector rounded out the bottom of today's leaderboard with its loss of 1.0%.

While most cyclical sectors trailed behind the broader market, discretionary shares (-0.2%) and technology (-0.1%) outperformed.

The discretionary space finished ahead of the S&P with help from media companies after Dow component Walt Disney (DIS 65.49, +1.55) said it plans to increase the size of its buyback. However, apparel manufacturers lagged after Lululemon (LULU 65.29, -3.73), Vera Bradley (VRA 18.85, -0.60), and Men's Wearhouse (MW 34.08, -4.69) issued profit warnings.

Countercyclical sectors ended mixed as the telecom services space added 1.0% while consumer staples, health care, and utilities lost between 0.2% and 0.3%.

Early afternoon headlines from Washington reminded participants that the U.S. budget situation remains far from solved.

House Speaker John Boehner said that spending reforms must be implemented in order to increase the debt ceiling. The Speaker also commented on Syria, saying that he has doubts about the plan to put Syria's chemical weapons under international control.

The remarks were followed by comments from Senate Majority Leader Harry Reid who said the current direction of House Republicans puts the government on track for a shutdown, and that giving in to the Tea Party is equivalent with rooting for a shutdown.

Treasuries surrendered their gains into the close, and the benchmark 10-yr yield ended little changed at 2.90%.

Volume was a bit below average as 642 million shares traded hands on the floor of the NYSE.

In today's economic data, weekly initial claims fell below the 300,000 level for the first time since March 2006. However, the Department of Labor said the sharp drop was due to computer problems. The initial claims level declined to 292,000 for the week ending September 7 from an unrevised 323,000 for the week ending August 31. The consensus expected the initial claims level to increase to 327,000.

The DoL announced that two states upgraded their computer systems, which resulted in an unexpected drop in claims. It is unknown how long the computer errors will remain in the system and it could affect the data for the next few weeks. It should be reiterated that the DoL does not believe the drop in claims this week signals a change in labor market conditions. Conditions remain better than where they were a few months ago but nowhere near as strong as a sub-300,000 reading would suggest.

Separately, export prices, excluding agriculture, ticked down 0.1% in August after an unchanged prior reading. Excluding oil, import prices declined 0.2%, which follows last month's decline of 0.4%.

The August Treasury Budget showed a deficit of $147.9 billion, down from a deficit of $190.5 billion in August 2012. Since the data are not seasonally adjusted, the data cannot be compared with the July level. The consensus expected the budget to show a deficit of $146.0 billion.

Tomorrow, August retail sales, retail sales ex-auto, PPI, and core PPI will all be reported at 8:30 ET. In addition, the preliminary reading of the September University of Michigan Consumer Sentiment Survey and July business inventories will be released at 9:55 ET and 10:00 ET, respectively.

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