Day Traders Diary


The S&P 500 registered its fourth consecutive advance, climbing 0.6% to extend its October gain to 5.4%. The Dow Jones Industrial Average (+0.7%) outperformed the benchmark index while the Nasdaq (+0.3%) lagged after starting the session in-line with the S&P.
The tech-heavy Nasdaq posted a modest advance of 0.3% after the exchange experienced an intraday data dissemination issue that prevented index quotes from being sent out for nearly an hour. However, the issue was isolated to the index while individual components traded normally.
One of the components that contributed to the Nasdaq's underperformance was Apple (AAPL 516.68, -13.20). The largest tech stock lost 2.5% after its below-consensus gross margin guidance overshadowed its earnings beat on above-consensus revenue.
Despite Apple's relative weakness, the technology sector (+0.5%) ended in-line with the broader market, bolstered in part by the 2.7% gain in the shares of IBM (IBM 182.12, +4.77). Big Blue rallied after the company's Board of Directors authorized an additional $15 billion for its share buyback program. Chipmakers also contributed to the sector's strength as the PHLX Semiconductor Index advanced 1.5%.
Outside of technology, consumer discretionary (+0.6%) and energy (+0.7%) were the only other outperformers among cyclical sectors while financials, industrials, and materials ended with gains of 0.3% apiece.
The discretionary sector received support from homebuilders as all major builders posted gains while the iShares Dow Jones US Home Construction ETF (ITB 23.43, +0.32) rose 1.4%. Meanwhile, the energy sector was underpinned by BP (BP 45.90, +2.18) and Valero (VLO 40.21, +0.76) after both reported solid quarterly results.
Among countercyclical groups, utilities (+0.1%) lagged while consumer staples (+0.9%), health care (+0.7%), and telecom services (+1.5%) outperformed. Among earnings of note, Pfizer (PFE 31.25, +0.51) settled higher by 1.7% after beating bottom-line estimates by two cents on in-line revenue.
Treasuries ended on their highs as the 10-yr yield slipped two basis points to 2.50%.
With just two sessions left in October, the S&P is on track to post a solid monthly advance of 5.3%. While the month-to-date gain is impressive, the S&P 500's performance over the past 15 sessions has been even more eye-popping. Since October 8, the index has gained more than 7.0%. Investors will receive the latest policy statement from the Federal Open Market Committee tomorrow, but the markets are expecting the FOMC decision to be a non-event.
Trading volume was on the light side as just over 680 million shares changed hands on the floor of the New York Stock Exchange. Today's economic data was plentiful, but did little to suggest the Federal Reserve will be eager to curtail the pace of its asset purchases in the near term.
The Conference Board's Consumer Confidence Index plummeted in October, falling from an upwardly revised 80.2 (from 79.7) to 71.2 (73.1 consensus). The entire decline in confidence can be attributed to the reaction to the government shutdown and near-default by the U.S. Treasury.
Typically, confidence levels are influenced by equity trends, oil prices, labor conditions, and media reports. Other than the negative media attention on the shutdown, all of the typical components moved in a positive direction in October. If these trends continue in November, the Consumer Confidence Index should slowly return to at least September levels.
Separately, September retail sales declined 0.1% to follow an August increase of 0.2% (-0.1% consensus). The headline decline in retail sales masked an otherwise strong report, especially considering that private payroll growth was much weaker than expected.
The entire decline in sales was the result of a 2.2% drop in motor vehicle demand. Motor vehicle manufacturers already showed that August sales were boosted by calendar effects stemming from an extra weekend and the Labor Day holiday. With those biases removed, sales were set to decline substantially in September, which translated into the 2.2% drop in motor vehicle sales.
Total business inventories increased 0.3% in August after increasing 0.4% in July (+0.2% consensus).
Also of note, September producer prices fell 0.1% after increasing 0.3% in August (+0.2% consensus). That was the first monthly decline since prices fell 0.7% in April.
Food prices unexpectedly declined 1.0% in September after increasing 0.5% in August. A 17.9% drop in fresh and dry vegetables prices contributed to most of the September decline. Those prices increased 26.9% in August.
Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET, October ADP Employment Change will be released at 8:15 ET, and September CPI will cross the wires at 8:30 ET. In addition, the FOMC will release its latest policy statement at 14:15 ET. On the earnings front, General Motors (GM 36.06, +0.26), Comcast (CMCSA 47.71, -0.52), and Exelon (EXC 28.05, -0.02) will report their results ahead of the opening bell. 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.