Day Traders Diary


It was day eight of the partial government shutdown and it was day two this week in which the major indices fell victim to broad-based selling interest. Once again, the budget/debt ceiling impasse in Washington was largely to blame.

The Nasdaq Composite was the biggest loser today, sliding 2.0% on the back of pronounced weakness in many of the market's favorite momentum stocks. The cracks in leading names like LinkedIn (LNKD 222.59, -14.62), (PCLN 997.60, -44.08), Tesla (TSLA 174.70, -8.37) and Facebook (FB 47.14, -3.38) provided an added cue for buyers to stick mostly to the sidelines.

There were efforts during the day to forge a rebound effort, but they were all short-lived as another day of back-and-forth remarks between Republicans and Democrats that amounted to more of the same entrenched views on reaching a budget agreement and raising the debt limit provided little incentive to commit new money.

Briefly, House Speaker Boehner said he would like the president to sit down and negotiate with the GOP before passing a continuing resolution and raising the debt limit while President Obama said he is open to negotiating after Congress passes a continuing resolution and raises the debt limit.

The major indices finished at their lows for the day as a final wave of selling interest in the last ten minutes completed today's damage. The utilities sector (+0.6%) was the only sector in the S&P 500 to finish in positive territory. It was only fitting perhaps that the low beta sector outperformed as high beta stocks got hit hard.

Even so, there wasn't a full-on safety trade today. Longer-dated Treasuries and gold prices ended with modest losses while the US Dollar Index was little changed to the upside.

In terms of the Treasury market, the real point of interest was at the front end of the curve. The 4-week bill surged nearly 14 basis points to 0.29% as traders remained leary of the paper with the October 17 debt limit deadline on the near horizon. The 4-week yield is at its highest level since October 2008.

Wal-Mart (WMT 72.89, +1.02), Procter & Gamble (PG 76.35, +0.70), and Coca-Cola (KO 37.28, +0.23) were the only Dow components to finish higher. That helped the Dow Jones Industrial Average show some relative strength versus its counterparts, most of which fell between 1.2% and 2.0%.

The continued weakness in the stock market and the continued impasse in Washington continued to benefit the CBOE Volatility Index (20.48, +1.07), which tacked on another 5.5% after gaining 16% on Monday.

Volume picked up on today's sell-off. 733 mln shares traded at the NYSE versus just 595 mln on Monday. 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.