Day Traders Diary


The S&P 500 kicked off the fourth quarter on an upbeat note, climbing 0.8%. Stocks made the bulk of their advance during the opening 90 minutes before spending most of the afternoon near their highs. Late afternoon trade saw some profit-taking, but a final-minute surge sent the indices back to their highs as equities appeared unconcerned with the first day of the government shutdown.

All ten sectors posted gains as equities drew strength from typical start-of-quarter inflows. Risk assets also benefited from the rebound in Europe where yesterday's fears of a possible collapse of the Italian government were alleviated by reports indicating about 20 PDL ministers are ready to form a breakaway party supporting Prime Minister Enrico Letta. The fluid situation is expected to become a bit clearer tomorrow when the prime minister appears in front of the parliament.

The Nasdaq was the top performing index of the third quarter (+10.8%) and its relative strength continued into today's session. The index advanced 1.2% with support from its largest component. Apple (AAPL 487.96, +11.21) rose 2.4% after activist investor Carl Icahn said, in a tweet, that he pushed for a $150 billion buyback during his dinner meeting with Chief Executive Officer Tim Cook.

The outperformance of the Nasdaq was also due in part to the relative strength of the tech sector (+1.0%) and biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 213.78, +4.18) climbed 2.0%, contributing to the strength of the health care sector (+1.3%), which ended in the lead.

In the health care space, Dow component Merck (MRK 48.74, +1.13) jumped 2.4% after announcing restructuring plans that include about 8,500 layoffs.

Outside of technology and health care, the discretionary sector (+0.9%) was the only other outperformer. Retailers fared well as (AMZN 320.95, +8.31) advanced 2.7% and the broader SPDR S&P Retail ETF (XRT 82.93, +0.91) added 1.1%.

Elsewhere, commodity-related sectors, energy (+0.5%) and materials (+0.5%), finished in the green even as crude oil and gold registered losses. The underlying commodities fell 0.5% and 2.8% to $101.84 per barrel and $1290.00 per troy ounce, respectively.

Treasuries ended near their lows with the benchmark 10-yr yield rising three basis points to 2.64%.

Trading volume was roughly in-line with the average as 717 million shares traded hands on the floor of the NYSE. Today's economic data was limited to the September ISM Manufacturing Index, which increased to 56.2 from 55.7. This represented the strongest reading since April 2011 while the consensus expected the index to fall to 55.0.

Production levels improved modestly as the related index increased to 62.6 in September from 62.4. After reaching its highest point since April 2011, the new orders index fell from 63.2 in August to a still elevated 60.5 in September.

The August construction spending report was also on today's schedule, but was delayed due to the government shutdown.

Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET and the September ADP Employment Change report will cross the wires at 8:15 ET.from 57.1 (57.3 forecast). French Manufacturing PMI improved to 49.8 from 49.5 (49.5 expected). Italy's Manufacturing PMI slipped to 50.8 from 51.3 (51.0 consensus) and the monthly unemployment rate rose to 12.2% from 12.1% (12.0% expected).

Great Britain's FTSE is lower by 0.3%. Producer of consumer goods Unilever leads to the downside with a loss of 3.7% after making cautious remarks about its most recent quarter. On the upside, financials Aviva and Barclays trade higher by 2.3% and 1.3%, respectively.
In Germany, the DAX trades up 0.6% as financials display strength. Commerzbank and Deutsche Boerse hold respective gains of 2.0% and 2.7%.
France's CAC is higher by 0.7% with banks contributing to the strength as BNP Paribas, Credit Agricole, and Societe Generale sport gains between 0.9% and 1.3%. Beverage producer Pernod Ricard is the worst index performer, down 1.5%.
08:56 WIRES On The Wires

The National Multiple Sclerosis Society has entered into a research collaboration agreement with GE Healthcare (GE) through Fast Forward, a not for profit subsidiary of the National Multiple Sclerosis Society, to co-fund a clinical study with the GE investigational PET tracer, GE180, in patients with multiple sclerosis.
Versar (VSR) has been awarded two new task orders under its existing Personal Services Contract in Afghanistan. Task orders three and four are valued at $30.5 mln cumulatively and represent significant contract growth in Versar's four-year long contract with USACE. This IDIQ contract has a maximum contract capacity of $170 mln and co has received $63.6 mln through task order four.
Reed's (REED) announced that Wegmans Food Markets has agreed to begin carrying four flavors of Reed's Culture Club Kombucha for immediate distribution into their stores.
Merck (MRK) announced plans to move its global headquarters from Whitehouse Station, N.J., to its existing facilities in Kenilworth, N.J.
WellCare Health Plans (WCG) announced that effective today, the transition of the former UnitedHealthcare South Carolina Medicaid program is completed and WellCare of South Carolina is now fully operational.
GEO Group (GEO) has completed the defeasance of non-recourse bonds associated with the 1,904-bed South Texas Detention Complex in Pearsall, Texas for ~ $2.5 mln, net of cash reserves. The transaction is expected to be modestly accretive to GEO's Adjusted Funds from Operations and will save GEO ~ $5.5 mln in principal debt payments in 2014.
MakerBot, a subsidiary of Stratasys (SSYS), announced shipment of first MakerBot Digitizer Desktop 3D Scanners, a MakerWare 2.3.0 update.
08:54 WIRES On The Wires

Skyworks Solutions (SWKS) is partnering with Wistron NeWeb, an ODM in Asia and supplier of connected home solutions for a number of branded OEMs. WNC is leveraging Skyworks' power management and ZigBee front-end modules for several of their low-power RF devices.
Unisys (UIS) announced that it is making its IT Service Management as a Service solution available to clients via Microsoft's (MSFT) Windows Azure cloud platform.
AtriCure (ATRC) is partnering with atrial fibrillation centers and thought leaders across Europe to provide best-in-class training on surgical ablation.
Red Hat (RHT) announced the general availability of Red Hat Satellite 5.6.
Meru Networks (MERU) announced that The Carneros Inn in Napa, Calif. has increased guest satisfaction and decreased IT help desk calls and on-site responses by replacing its previous wireless network with Wi-Fi from Meru.
Nalco, an Ecolab (ECL) co, implemented a price increase for all Water and Process Services industry segments. Pricing for most Nalco Water and Process Services programs will increase globally between 5% and 15%, varying by country and product. This price increase is effective immediately or as existing contracts allow.
Saban Brands has extended agreements with Nickelodeon, trademark of Viacom (VIAB), and Bandai America through 2016 for its Power Rangers franchise.
Invesco (IVZ) has filed for SEC registration of eight new mutual funds that are a suite of liquid alternative funds.

08:54 SUMRX Briefing Bullet Points: 36 minutes ahead of the open S&P futures are +4 vs. fair value and DJ futures are +18
Equity futures point to small gains at the open as money looks to move into equities at the start of the fourth quarter despite the government shutting down at midnight. Traders will continue to watch the 1680 support level as addition help comes from the 50-day moving average.

It was a sea of green across Asia as all of the major averages aside from Australia's ASX (-0.2%) advanced. Japan's Nikkei (+0.2%) eked out a gain after Prime Minister Abe moved towards hiking the sales tax to 8% (currently 5%), beginning in April, and also announcing the consideration of monetary stimulus that may include cash handouts. Meanwhile, Australia's ASX was the laggard after the Reserve Bank of Australia held its key rate steady at a record low 2.50% while also leaving open the possibility of further rate cuts. Markets in China and Hong Kong were closed for Golden Week, but that did not stop the release of the disappointing Chinese Manufacturing PMI (51.1 actual v. 51.6 expected, 51.0 previous).

In Europe, markets are mostly higher with only Britain's FTSE (-0.4%) trading in the red. Outperformance comes from the periphery despite both Spanish (50.7 actual v. 51.6 expected, 51.1 previous) and Italian (50.8 actual v. 51.2 expected, 51.3 previous) Manufacturing PMI numbers falling short of estimates. Italy's MIB is up 0.9% while Spain's IBEX sports a 0.8% advance. Meanwhile, peripheral yields are sharply lower with the Spanish 10-yr off 11 bps at 4.205%.

Bringing focus back to the U.S., Treasuries hold modest losses with the selling producing a 3 bp rise in yields. The benchmark 10-yr yield holds near 2.640%. Meanwhile, selling has the Dollar Index testing the 80.00 level. Notable is the greenback's weakness against the British pound (GBPUSD +60 pips @ 1.6245) and Japanese yen (USDJPY -40 pips @ 97.85). DMND, PAYX, WAG are names to watch following the release of their quarterly results...The following are the most important factors influencing the market this morning:

Asian Markets Close: Nikkei +0.2%, Hang Seng CLOSED, Shanghai CLOSED
In regional economic data:
China's Manufacturing PMI ticked up to 51.1 from 51.0 (51.5 forecast).
Japan's unemployment rate increased to 4.1%% from 3.8% (3.8% expected) and average cash earnings fell 0.6% year-over-year (-0.2% forecast, 0.1% last). Separately, the Tankan Large Manufacturers Index rose to 12 from 4 (7 consensus) and the Large Non-Manufacturers Index ticked up to 14 from 12, as expected. Also of note, the Small Manufacturing Index rose to -9 from -14 (-12 forecast).
South Korea's CPI rose 0.2% month-over-month (0.5% expected, 0.3% prior) while the year-over-year reading came in at 0.8% (1.2% forecast, 1.3% previous). In addition, the trade surplus narrowed to $3.71 billion from $4.85 billion ($4.65 billion consensus).
The Reserve Bank of Australia held its key interest rate steady at 2.50%, as expected. Meanwhile, retail sales rose 0.4% month-over-month (0.3% expected, 0.1% prior) and the AIG Manufacturing Index climbed to 51.7 from 46.4.
India's HSBC Manufacturing PMI rose to 49.6 from 48.5.
Looking at news:
In Japan, Prime Minister Shinzo Abe has decided to follow through with the sales tax increase from 5.0% to 8.0%. Along with the tax increase, a fiscal stimulus in the amount of JPY5 trillion will also be introduced.
Europe: FTSE -0.4%, CAC +0.7%, DAX +0.5%, MIB +0.8%, IBEX +0.9%
Investors received a fair share of data:
Eurozone Manufacturing PMI slipped to 56.7 from 57.1 (57.3 expected) and the unemployment rate held steady at 12.0% (12.1% forecast).
Germany reported a 25,000 increase in the number of unemployed (-5,000 expected, 9,000 prior) and the unemployment rate ticked up to 6.9% from 6.8% (6.8% consensus). Separately, Manufacturing PMI slipped to 51.1 from 51.3 (51.3 forecast).
Great Britain's Manufacturing PMI fell to 56.7 from 57.1 (57.3 forecast).
French Manufacturing PMI improved to 49.8 from 49.5 (49.5 expected).
Italy's Manufacturing PMI slipped to 50.8 from 51.3 (51.0 consensus) and the monthly unemployment rate rose to 12.2% from 12.1% (12.0% expected).
In news:
In Italy, Prime Minister Enrico Letta is scheduled to address the parliament on Wednesday at 16:00 ET local time. It is currently unclear whether Mr. Letta will seek a confidence vote. Separate reports indicate up to 20 PDL Senators have looked into forming a breakaway party after Silvio Berlusconi called for his party's resignation from government.
TKPYY and Lundbeck announces FDA approval of Brintellix for Treatment of adults with major depressive disorder
BIIB reports new data showing significant clinical and MRI improvements with PLEGRIDYGHDX presents Oncotype DX studies reinforcing value of tests in guiding treatment for multiple cancers
LXRX achieves 'positive' Results in Type 2 Diabetes Patients with Renal Impairment; LX4211 provided clinically meaningful and statistically significant reductions
B agreed to purchase the capital stock of all the Mưnner operating companies for EUR 275 mln
RH is lower by 2% after 10% holder CP Home Holdings filed form 144 related to proposed sale of 3,978,731 shares
ATRO announces acquisition of AeroSat for $12 mln in cash, plus the potential for an earn out
LEI announces departure of Chief Financial Officer Dale to pursue other interests
JCP: Perry Corp. disclosed 3.28% active stake in 13D filing out last night; down from 8.62% previously reported on 8/30

Earnings/guidance of interest:

WAG is +1% after reporting Q4 EPS of $0.73, in-line with consensus; co preannounced rev of $17.95 bln in early Sept
DMND is -8% after beating Q4 EPS on rev in-line with upside late August preannouncement; co was cautious regarding Q1 and sees earnings improvement in FY14
BGCP guided Q3 rev to the low end of its prior range ($410-440 mln vs. $427 mln consenus)
PAYX beat EPS by $0.01 on in-line rev; co reaffirmed FY14 guidanceWD lowered its Q3 origination guidance
MRK announced restructuring to sharpen its R&D focus; co also reaffirmed FY13 EPS guidance

Select analyst actions of interest:

Upgrades: TI reinstated with a Buy at Goldman, NOK added to Most Preferred Tech List at BofA/Merrill, NFLX early strength attributed to positive analyst comments and big tgt raise, HRB upgraded to Overweight from Equal Weight at Morgan Stanley, UA upgraded to Neutral from Underweight at JP Morgan; tgt raised to $77, AFL upgraded to Outperform from Mkt Perform at FBR Capital
Downgrades: AIXG downgraded to Sell from Hold at Canaccord Genuity, OLED downgraded to Sell from Hold at Canaccord Genuity, FINL downgraded to Sell from Neutral at Goldman, BWLD downgraded to Outperform from Strong Buy at Raymond James, RRGB downgraded to Outperform from Strong Buy at Raymond James, A Agilent downgraded to Hold from Buy at Stifel
Technical factors: Some short term some recovery gains were not too surprising given the 3% slide, extended indicators and hold at 50 day support but continued shutdown uncertainty kept follow through from developing. Headlines may continue to drive the intraday action but from a chart perspective if the index can maintain a posture above a minor barrier at 1678 and the 1675/1674 area there is near term potential for additional upticks. Support below is at 1672/1670. First level resistance is at 1686/1687 followed by 1691/1692.

Looking ahead: ISM Index (10), construction spending (delayed), and auto/truck sales (14) are scheduled for release today. GPN, RECN, SURG, TISI are set to report following today's closing bell while MON is scheduled to release its quarterly results ahead of tomorrow's open. 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.