Day Traders Diary


Equities ended the week on a lower note with the S&P 500 shedding 0.4%. The index widened its loss for the week to 1.1% as participants exhibited caution ahead of the weekend given the uncertainty associated with the ongoing budget showdown.

Earlier today, the Senate passed a funding bill that would keep the government running through November 15. The bill passed with a 54-44 vote after the provision to defund Obamacare was removed from the language. However, the bill will now head back to the House of Representatives where the defunding provision originated. President Obama weighed in during the late afternoon, saying it is up to Congress to keep government operating and that the G.O.P. is blocking the process.

Concerns over the budget debate have weighed on sentiment throughout the week, contributing to the weakness in the S&P. Meanwhile, the Nasdaq displayed relative strength and finished the week with a slim gain of 0.2%.

The Nasdaq outperformed today as biotechnology overshadowed the underperformance of the tech sector (-0.6%). The iShares Nasdaq Biotechnology ETF (IBB 210.73, +0.57) added 0.3%, also contributing to the relative strength of the health care sector, which tacked on 0.1%.

Another pocket of relative strength could be found among discretionary shares (+0.1%). Even though homebuilders lagged and the iShares Dow Jones US Home Construction ETF (ITB 22.38, -0.29) lost 1.3%, the sector received support from apparel manufacturers. Dow component Nike (NKE 73.64, +3.30) rallied 4.7%, notching a fresh record high after reporting better-than-expected earnings and above-consensus worldwide futures orders.

Elsewhere, traditional tech companies lagged with top-weighted names like Apple (AAPL 482.75, -3.47), Google (GOOG 876.39, -1.78), and Intel (INTC 22.98, -0.43) posting losses between 0.2% and 1.8%. Microsoft (MSFT 33.27, +0.50) outperformed, climbing 1.5% amid reports Ford (F 17.05, -0.22) Chief Executive Officer Alan Mulally may become the next CEO of the tech company.

On the earnings front, shares of Accenture (ACN 74.09, -1.78) lost 2.4% after the company's cautious first-quarter revenue guidance outweighed its mixed earnings.

The industrial sector (-0.6%) also weighed on the S&P amid broad weakness. Transportation-related names were pressured by airlines with United Continental (UAL 30.91, -3.16) tumbling 9.3%. The broader Dow Jones Transportation Average lost 0.6% even as crude oil posted a modest decline (-0.3% at $102.68/bbl).

Treasuries climbed steadily and the benchmark 10-yr yield slipped two basis points to 2.63%.

Below-average volume plagued the market throughout the week, and today's session saw 647 million shares change hands on the floor of the New York Stock Exchange.

The final reading of the September University of Michigan Consumer Sentiment Index was revised up to 77.5 from 76.8 in the advance report. The consensus expected the Consumer Sentiment Index to increase to 77.3. Even though sentiment was revised higher in the final release, the index is still well below the final August reading of 82.1. The month-to-month drop in sentiment was in-line with the Conference Board's Consumer Confidence Index, which dropped to 79.7 in September from 81.8 in August.

Consumer sentiment levels normally follow trends in equity prices, gasoline prices, media reports, and unemployment trends. Even though the initial claims level is clearly showing an improvement in labor conditions, consumers still believe that the labor market is not improving. That negative response offset strong gains in the equity market.

Separately, August personal income increased 0.4% after increasing an upwardly revised 0.2% in July. The consensus expected personal income to increase 0.3%. As expected from the August employment report, wages rose a solid 0.4% in August after declining 0.2% in July.

The weakness in the equity market in August reduced personal income receipts on assets by 0.2%. Gains in the equity market in July were the sole reason why income growth was positive in July. On Monday, the September Chicago PMI will be reported at 9:45 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.