Day Traders Diary


The S&P 500 settled lower by 0.3%, registering its fourth consecutive loss. Small caps outperformed the benchmark average as the Russell 2000 added 0.2%.

Stocks slipped during the opening hour in reaction to a below-consensus consumer confidence report for September. Gains in the stock market were unable to thwart pessimism in the labor market as the September Consumer Confidence Index fell to 79.7 from an upwardly revised 81.8 (from 81.4) in August. The consensus expected the Consumer Confidence Index to drop to 80.0.

Consumer confidence typically follows changes in equity prices, labor market conditions, gasoline prices, and media reports. While the equity market had a banner month for most of September, concerns about future labor growth weighed more heavily on consumer attitudes.

Despite the opening slip, the S&P recovered swiftly, but was unable to hold the 1,700 level into the close as financials and technology weighed.

The financial sector (-0.6%) underperformed for a second consecutive day with JPMorgan Chase (JPM 50.32, -1.14) leading to the downside. The stock fell 2.2% after The New York Times revealed the Department of Housing and Urban Development sought a $20 billion settlement in a mortgage-backed securities issuance case against the bank. This followed yesterday's reports, which said prosecutors in California are set to announce charges against JPMorgan Chase in this case.

Elsewhere, the technology sector ended lower by 0.3% as many top components lagged while chipmakers rallied. Oracle (ORCL 33.64, -0.30), Microsoft (MSFT 32.46, -0.29), and Visa (V 193.34, -2.90) lost between 0.9% and 1.5% while the PHLX Semiconductor Index advanced 0.7% after Applied Materials (AMAT 17.44, +1.45) announced plans to merge with Tokyo Electron.

Even though the S&P ended in the red, there were some pockets of strength among cyclical sectors like industrials and consumer discretionary.

Industrials (+0.3%) finished in the lead thanks to all-around support. The largest sector component, General Electric (GE 24.32, +0.04) advanced 0.2% and transportation companies also outperformed. The Dow Jones Transportation Average added 0.1%.

Meanwhile, the discretionary sector (+0.1%) saw homebuilders rally after KB Home (KBH 17.76, +0.73) and Lennar (LEN 36.01, +1.47) reported bottom-line beats. Housing stocks also drew strength from continued gains in home prices as the July Case-Shiller 20-city Index rose 12.4% ( consensus 12.0%) and the FHFA Housing Price Index improved by 1.0%. The iShares Dow Jones US Home Construction ETF (ITB 22.66, +0.41) gained 1.8%.

Also aiding homebuilders was indirect support from the continued retreat in yields. Treasuries ended near their highs with the 10-yr yield down six basis points at 2.65%. This marked the lowest level for the benchmark yield since mid-August.

Trading volume was a bit below average as 674 million shares changed hands on the floor of the New York Stock Exchange.

Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET; August durable orders will be released at 8:30 ET; and August new home sales will cross at 10:00 ET.

The U.S. Treasury will auction $35 billion in 5-yr notes.

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