Day Traders Diary


There wasn't much to be said about the trading action in the stock market on Tuesday because there wasn't a whole lot of trading action. Volume at the NYSE totaled a piddly 577 mln shares versus an average of 661 mln shares. The light volume reflected a wait-and-see mindset ahead of Wednesday's highly-anticipated announcement from the FOMC on whether it has decided to begin curtailing its asset purchase program.

It is only fitting perhaps that the S&P 500 sits on the cusp of a new all-time high just as the Fed is presumably on the cusp of cutting back on its asset purchases. Some believe the market is only where it is because of the Fed's asset purchase program. Accordingly, a decision on Wednesday to cut back on its asset purchases will provide a good signpost in the future for determining just how well the stock market and the economy were able to handle a Fed tapering.

Today, it was pretty much steady as she goes. Bolstered by the news that Microsoft (MSFT 32.93, +0.13) is raising its quarterly dividend by 22% to $0.28 per share and is replacing a prior $40 bln share repurchase program that was set to expire at the end of the month with a new one, the S&P 500 recorded its tenth gain in the last eleven sessions.

Most of the gains were achieved shortly after the start of trading. From about 10:00 a.m. ET on, the S&P 500 vacillated in a two-point range between 1703 and 1705, making small forays below and above those respective levels. The S&P 500 settled the day just below 1705.

Big moves today were limited to individual stocks like Apple (AAPL 455.32, +5.20), which jumped 1.2% on a bargain hunting bid and assumptions that it may soon follow Microsoft's lead in announcing an increased return of capital to shareholders. Facebook (FB 45.07, +2.56) also outperformed on little news but strong volume.

Not surprisingly, with Microsoft, Apple, and Facebook all pushing higher, the tech sector (+0.6%) was a pillar of support throughout today's trading. The industrials (+0.6%), consumer discretionary (+0.6%), and utilities (+0.6%) sectors also fared well. In fact, every sector, with the exception of the basic materials sector (-0.3%), which was pressured by a weak showing from the paper and packaging stocks, ended the day higher.

The S&P 500 ended the session just shy of its best levels of the day. The same can be said for the CBOE Volatility Index (14.54, +0.16) as investors placed their bets that volatility will be picking up in the near term.

Commodities were pretty much weak across the board. Per usual, the performance of oil ($105.49, -$1.10) and gold ($1310.00, -$7.80) caught most of the market's attention. Their weakness was considered by some to be a harbinger of a Fed tapering announcement since it is presumed that a tapering will help keep inflation pressures at bay.

On that note, the Consumer Price Index for August didn't reveal any worrisome inflation signals. Total CPI and core CPI, which excludes food and energy, both rose just 0.1% from July. Over the last 12 months, total CPI is up 1.5% while core CPI is up 1.8%. That is below the 2.0% rate of increase seen for each in September 2012 when the Fed announced QE3.

The other piece of economic news today showed homebuilder confidence held pretty steady in September. The NAHB Housing Market index checked in at 58 ( consensus 59) versus 59 for August.

The FOMC decision and the Fed's updated economic projections will be released at 2:00 p.m. ET on Wednesday. Fed Chairman Bernanke's press conference will follow at 2:30 p.m. ET. What the chairman communicates at that press conference is arguably more important than what is said in the directive. 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.