Day Traders Diary


The major averages ended the first full week of 2014 on a mixed note. The S&P 500 added 0.2% while the Dow Jones Industrial Average shed less than 0.1%. For the week, the S&P 500 gained 0.6% while the Dow slipped 0.2%.
Prior to the open, it was reported that job growth slowed considerably in December with the addition of just 74,000 jobs. This was well below the consensus, which called for a reading of 197,000. The unemployment rate plunged to 6.7% from 7.0% but that was a result of another sharp drop in the labor force participation rate. Furthermore, aggregate wages fell 0.1% after increasing 0.7% in November. The drop is expected to put downward pressure on consumption growth unless consumers decide to lower their savings rate.
The disappointing report pressured the dollar while metals and Treasuries rallied, suggesting a fair amount of participants expect the Fed to delay the next round of tapering. The dollar index finished near its low (-0.5% at 80.64) while Treasuries ended on their highs (10-yr yield -10 bps at 2.86%). Meanwhile, gold futures advanced 1.4% to $1246.60/ozt.
The strength in precious metals underpinned miners, which contributed to the strength of the materials sector. The Market Vectors Gold Miners ETF (GDX 22.01, +0.74) jumped 3.5% while the broader sector ended ahead of the remaining cyclical groups with a gain of 0.4%. Even though the sector displayed strength, there were still some pockets of weakness. Namely, Alcoa (AA 10.11, -0.58) fell 5.4% after missing bottom-line estimates by two cents. The company said it expects to see global aluminum demand grow at 7.0% in 2014, which matches last year's growth rate.
Outside of materials, the discretionary sector (+0.4%) was another notable outperformer among growth-sensitive groups. Homebuilders provided significant support as the iShares Dow Jones US Home Construction ETF (ITB 24.76, +0.35) jumped 1.4% amid today's retreat in yields.
Speaking of lower yields, they also factored into the outperformance of rate-sensitive telecom services (+0.4%) and utilities (+1.4%). The other two countercyclical groups were mixed as health care (+0.4%) outperformed while consumer staples (+0.2%) ended in-line with the S&P 500.
On the downside, the financial sector (-0.1%) was the lone decliner. Citigroup (C 54.72, -0.48) underperformed the other majors with a loss of 0.9%.
Despite the mixed finish, participants did not show strong demand for volatility protection as the CBOE Volatility Index (VIX 12.18, -0.71) fell 5.5%, ending at its lowest level of 2014.
Trading volume was well below average as only 655 million shares changed hands on the NYSE floor.
Outside of the aforementioned nonfarm payrolls, investors received another data point today.
In November, wholesale inventories increased 0.5%, down from a 1.3% (from 1.4%) gain in October. The consensus expected wholesale inventories to increase 0.2%. Inventory growth over the past few months has been extremely strong, yet similar gains in sales suggest inventory growth trends can remain on the current path. Sales rose 1.0% in November after increasing 1.1% in October.
On Monday, the December Treasury Budget will be reported at 14:00 ET.

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