Day Traders Diary


The S&P 500 shed 0.3%, extending its losing streak to five sessions. Including today's decline, the benchmark index has surrendered 1.9% since last Thursday.

Stocks endured a sloppy session as the S&P made two unsuccessful attempts at holding the 1,700 level. After opening just above its flat line, the S&P 500 slipped into the red before recovering swiftly with the help of energy (-0.1%) and materials (+0.2%). The financial sector (+0.5%) also fueled this morning's rebound after losing roughly 3.5% during the past four sessions.

The morning recovery placed the S&P above 1,700, but the index could not muster additional strength as consumer staples (-0.8%), health care (-0.8%), technology (-0.3%), and utilities (-0.7%) weighed. The underperformance of these groups briefly pressured the S&P back to its flat line. This retreat was followed by another run to 1,700, but the index slid from this level back to lows after a report from Bloomberg indicated Wal-Mart (WMT 74.65, -1.10) is cutting its orders amid a pile-up in inventories.

Concerns about lackluster sales at the largest retailer were received as a warning regarding the well-being of the broader sector, causing other retailers like Costco (COST 115.41, -0.93), Dollar General (DG 57.00, -1.11), and Target (TGT 63.24, -0.67) to slump to their lows. The affected names were able to regain a portion of their losses after CNBC cited a Wal-Mart official who described the headlines as misleading.

Afternoon action saw the S&P climb off its lows, but the index was unable to regain its flat line.

Commodities ended in mixed fashion as energy fell and metals displayed strength. Crude oil fell 0.8% to $102.31 per barrel while gold added 1.3%, ending at $1333.50 per troy ounce.

Treasuries saw steady demand throughout the session, and the benchmark 10-yr yield fell four basis points to 2.62%.

With the debt ceiling looming, Secretary of Treasury Jack Lew was quoted as saying the spending limit will be reached no later than October 17. The Congressional Budget Office also provided an estimate, expecting the spending ability to be exhausted between October 22 and the end of the month.

Trading volume was below average as 641 million shares changed hands on the floor of the NYSE.

In today's economic data, durable orders increased 0.1% after declining a downwardly revised 8.1% in July. The consensus estimate called for a 0.5% increase. Excluding transportation, durable orders declined 0.1% (+0.9% consensus) following an upwardly revised decline of 0.5% for July. Notwithstanding the headline disappointment, there were some encouraging elements to the report like the 0.9% increase in new orders for machinery, the 2.4% jump in new orders for motor vehicles and parts, and positive business investment data. New home sales managed a modest rebound in August. Sales rose from a downwardly revised 390,000 in July to 421,000 in August. The consensus expected new home sales to increase to 415,000. Even after the uptick, sales were at their second lowest level since December 2012.

New home sales represent the number of newly signed contracts and are much more responsive to changes in interest rates than the existing home sales data. The initial increase in mortgage rates caused a brief spike in sales in June as buyers rushed in to take advantage of relatively low rates before they went higher. That caused a large "payback" period to develop in July where sales fell 14%. The weak rebound in August suggests that buyers are not comfortable at current mortgage rates.

Separately, the MBA Mortgage Index rose 5.5%, posting its second consecutive increase.

Tomorrow, weekly initial claims and the third estimate of second quarter GDP will be reported at 8:30 ET while August pending home sales will be announced at 10:00 ET. 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.