Day Traders Diary


The S&P 500 settled higher by 1.4% with participants rushing into equities as Washington lawmakers appeared to be on the verge of striking a deal that would fund the government through January 15 while extending the debt ceiling until February 7, and maintaining the sequester.

Stocks registered opening gains after it was reported that Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell resumed working on a deal after the House of Representatives failed to vote on its own measure last evening. Equities caught a second wind in reaction to reports indicating House Speaker Boehner would bring the Senate plan for a vote on the House floor. Although the session ended before Congress had a chance to vote, the Senate plan is expected to be approved by both chambers.

All ten sectors posted gains with financials (+2.2%) ending in the lead. The sector received support from Bank of America (BAC 14.56, +0.32) and PNC Financial (PNC 73.87, +1.36) after both banks reported bottom-line beats. Thanks to today's gain, the financial sector extended its October advance to 3.9%.

Outside of financials, only health care and energy hold month-to-date gains larger than 3.0%. The health care sector rose 2.0% today, and received support from shares of Abbott Labs (ABT 35.90, +2.19) after the drug maker beat on earnings. Meanwhile, energy gained 1.4% as crude oil advanced 0.9% to $102.16 per barrel.

Elsewhere, consumer staples (+1.4%) also contributed to the rally as PepsiCo (PEP 82.27, +1.67) ended higher by 2.1% following its earnings beat on in-line revenue.

Although all sectors posted solid gains, industrials (+0.7%) trailed behind the remaining nine groups as defense contractors weighed. The PHLX Defense Index underperformed for the second day in a row, adding 0.1%. Transports, however, kept pace with the S&P as the Dow Jones Transportation Average advanced 1.4%.

With the reduced threat of imminent default, the CBOE Volatility Index (VIX 14.84, -3.82) lost 20.9%, tumbling to its lowest level since late September. Treasuries ended on their highs with the 10-yr yield down six basis points at 2.67%.

Trading volume was just above average as 753 million shares traded hands on the floor of the New York Stock Exchange.

On the economic front, the weekly MBA Mortgage Index ticked up 0.3% to follow last week's increase of 1.3%.

Separately, the October NAHB Housing Market Index fell to 55 from 58. Today's report was below the reading of 57 expected by the consensus.

Also of note, the Federal Reserve released its Beige Book, which did not contain many surprises. The report said economic growth during the period between September and early October continued at a "modest to moderate pace" while employment continued to grow modestly. The report also touched on the budget deadlock, saying the situation contributed to an increase in uncertainty.

Tomorrow, weekly initial claims will be reported at 8:30 ET while September industrial production and capacity utilization will both be released at 9:15 ET. The day's data will be topped off with the 10:00 ET release of the October Philadelphia Fed survey. On the earnings front, Goldman Sachs (GS 162.25, +4.62), UnitedHealth (UNH 75.19, +1.32), and Verizon (VZ 47.25, +0.93) will report their quarterly results before the opening bell.

Today's advance extended the S&P's year-to-date gain to 20.7%. The benchmark index ended the session less than nine points below its all-time high of 1729.86.

S&P 500 +20.7% YTD
DJIA +17.3% YTD
Nasdaq +27.2% YTD
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