Day Traders Diary


The S&P 500 fell 0.9% as the government shutdown continued for the third day without any strong indications a resolution to the stalemate may be on the horizon.
Even though stocks appeared largely unconcerned during the first two days of the shutdown, today's session featured a reminder from the Treasury, saying the consequences of a default could be worse than the events of 2008.
Equities retreated throughout the morning before finding support in the early afternoon following an article in The New York Times indicating Speaker of the House John Boehner told Republicans he would not allow a default to take place. The story was followed by a statement from the Speaker's office, which said this has always been Mr. Boehner's stance.
Thanks to the rebound, the S&P was able to erase a third of its losses, but could not close above its 50-day moving average (1680). The index endured an afternoon slip in reaction to shots fired near the U.S. Capitol. The scare caused a 30-minute lockdown of the Capitol building, and the suspect was reported dead on the scene.
All ten sectors ended in the red with influential groups like consumer discretionary (-1.0%), industrials (-1.1%), and technology (-1.0%) leading to the downside.
Notably, industrials finished near the bottom of the leaderboard for the second consecutive day. Like yesterday, defense contractors weighed on the sector as the PHLX Defense Index fell 1.0%.The largest index component, General Electric (GE 24.10, -0.23), also lost 1.0%.
The Dow Jones Transportation Average also underperformed, slumping 1.1%, even as airlines displayed relative strength. United Continental (UAL 31.65, +0.72) settled higher by 2.3%.
Elsewhere, the technology sector saw its top components, Apple (AAPL 483.41, -6.15), Google (GOOG 876.09, -11.90), and Qualcomm (QCOM 67.11, -0.57), lose between 0.8% and 1.4% while chipmakers outperformed. The PHLX Semiconductor Index shed 0.3%.
Countercyclical groups ended mixed as consumer staples (-0.5%) and telecom services (-0.4%) finished ahead of the S&P while health care (-1.0%) and utilities (-1.2%) lagged.
Treasuries registered modest gains, and the benchmark 10-yr yield slipped two basis points to 2.61%.
Today's trading volume was a bit below average as 703 million shares changed hands on the floor of the NYSE.
The weekly initial claims level increased to 308,000 from an upwardly revised 307,000 (from 305,000) while the consensus expected a rise to 315,000. After a couple weeks of unreliable claims data, the initial claims level has settled at a little over 300,000. This marks a vast improvement from August when claims were around 330,000.
Normally, this level of claims would suggest a strong gain in nonfarm payrolls. However, over the last couple of months, the strengthening in the claims level had no effect on payroll growth. Employers appear to be content with their workforce; hence, we have seen the drop in layoffs, but not a corresponding spike in hiring activity.
Separately, the September ISM Non-Manufacturing Index fell to 54.4 from 58.6 while the consensus expected the index to drop to 57.2. Last month's reading of the ISM Non-Manufacturing Index was the highest since December 2005 and was expected to pullback in September. The size of the pullback; however, was very unusual.
The non-manufacturing index normally lacks significant monthly volatility and moves in a nice smooth trend. September marked a departure as the index dropped by an unusually large 4.2 points. That was the biggest decline since November 2008. The index has moved at least 4.2 points in a single month only nine times since its inception in 1997.
Tomorrow's September nonfarm payrolls report will not be released due to the ongoing government shutdown. 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.