Day Traders Diary


The major averages posted losses across the board as the Nasdaq (-0.7%) led to the downside.

Stocks slumped at the open as cautious-sounding headlines from China combined with continued weakness among momentum names conspired to keep equities in the red throughout the session.

Reports out of the Middle Kingdom suggested the largest Chinese banks saw their debt write-offs triple during the first half of the year. Separate headlines indicated the People's Bank of China may tighten monetary policy due to excessive inflation. The liquidity crunch has made its presence known through the overnight Shanghai Interbank Offered Rate (SHIBOR), which jumped 73 basis points to 3.78%.

In addition to the news from China, stocks had to endure continued weakness among momentum names. Shortly after yesterday's close, activist investor Carl Icahn said he halved his stake in Netflix (NFLX 330.24, +7.72) after booking a 457% gain over the course of 14 months. Netflix outperformed today, but other momentum darlings like LinkedIn (LNKD 240.76, -4.19), Tesla (TSLA 164.50, -7.04), and Yelp (YELP 66.04, -3.37) posted losses as some participants may have taken a cue from Mr. Icahn, cashing in on some of this year's top performers.

Chipmakers were also victimized by heavy selling as the PHLX Semiconductor Index tumbled 3.4% after Altera (ALTR 32.30, -5.02) reported disappointing earnings and Broadcom (BRCM 26.36, -0.78) issued cautious guidance.

Even though select tech names displayed significant losses, the broader sector ended in-line with the S&P. Meanwhile, most other cyclical groups underperformed and the industrial sector (unch) was the only cyclical group that ended ahead of the broader market.

Industrials outperformed, building on the relative strength of Boeing (BA 129.02, +6.54), Norfolk Southern (NSC 86.06, +5.46), and Northrop Grumman (NOC 105.56, +4.10) after the three reported better-than-expected earnings. However, the sector could not turn positive due to the underperformance of Caterpillar (CAT 83.76, -5.41), which lost 6.1% after missing on earnings, revenue, and issuing cautious guidance.

Although equity indices spent the entire session in negative territory, only the energy sector (-1.4%) posted a loss exceeding 1.0% as crude oil slid 1.4% to $96.95 per barrel.

Countercyclical sectors outperformed with consumer staples ending in the lead with a modest gain of 0.1%.

Treasuries registered modest gains as the 10-yr yield slipped 2.5 basis points to 2.49%.

Trading volume was a bit below average as less than 710 million shares changed hands on the floor of the New York Stock Exchange.

On the economic front, the weekly MBA Mortgage Index slipped 0.6% to follow last week's uptick of 0.3%.

Separately, the August Housing Price Index from the FHFA increased 0.3%, which followed an increase of 0.8% observed during the prior month.

Lastly, export prices, excluding agriculture, ticked up 0.3% in September after an unchanged prior reading. Excluding oil, import prices rose 0.1%, which followed last month's decline of 0.2%.

Tomorrow, weekly initial claims and the August trade deficit will all be reported at 8:30 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.