Day Traders Diary


Today at 4:53 PM

Equities ended the Wednesday session on a mixed note. The Nasdaq and S&P 500 finished with respective losses of 0.5% and 0.2% while the Dow Jones Industrial Average ended flat. Despite its outperformance, the Dow was unable to settle above its 200-day moving average (15479) for the second day in a row.

Today's affair began on a lower note as stocks succumbed to the pressure exerted by the Japanese yen, which strengthened again overnight. Yen strength has been a considerable headwind for equities since the start of the year as many professionals who borrow in yen to fund their equity positions have found themselves in a bit of a pickle. In 2013, when the yen weakened steadily while equities rallied, the carry trade yielded strong results. This year, however, with the yen climbing and equities sliding, the losses have been compounding.

The dollar/yen pair marked its session low right below the 100.80 level this morning, but rallied sharply off that low. The pair then notched a high of 101.65 after today's better-than-expected ISM Services report before giving up a portion of its gain. Dollar/yen wasn't able to overtake the morning high and finished the New York Session right below the 101.40 level. Meanwhile, yen futures added 0.2%, extending their 2014 gain to 3.8%.

Overall, the lack of defined sector leadership and the presence of some mixed signals made for a sloppy session.

Out of the four top-weighted sectors, consumer discretionary (+0.2%), financials (-0.1%), and technology (+0.01%) outperformed while health care (-0.6%) lagged.

The discretionary sector drew strength from modest gains among retailers. The SPDR S&P Retail ETF (XRT 78.12, +0.25) added 0.3%, but remains down 11.3% so far in 2014. Elsewhere, technology displayed relative strength with some help from large-cap components like Apple (AAPL 512.59, +3.80) and Google (GOOG 1143.20, +5.04).

On the downside, health care (and Nasdaq Composite) struggled to keep pace with the S&P 500 as biotechnology lagged. The iShares Nasdaq Biotechnology ETF (IBB 236.95, -4.06) lost 1.7%, but remains higher by 4.4% this year.

Also of note, the industrial sector finished in-line with the S&P 500, but transports struggled. The Dow Jones Transportation Average lost 0.8% after CH Robinson (CHRW 53.16, -5.48) reported disappointing earnings.

The mixed performance pushed some participants in the direction of volatility protection as the CBOE Volatility Index (VIX 19.58, +0.47) rose 2.5%. Interestingly, the bond market did not reflect a safety bid as Treasuries ended on their lows with the 10-yr yield up four basis points at 2.67%.

Trading volume was a bit above average as 740 million shares changed hands at the NYSE.

Today's economic data included three reports:
"The weekly MBA Mortgage Index ticked up 0.4% to follow last week's 0.2% decline.
"According to today's ADP National Employment Report, employment in the nonfarm private business sector increased 175K in January. This was slightly below the increase of 178K expected by the consensus. The December reading was revised down to 227,000 from 238,000.
"The ISM Non-manufacturing Index for January increased to 54.0 from 53.0. The consensus expected the index to increase to 53.8. Weather conditions, which were blamed for the poor manufacturing report, seemed to have no impact on services sector. Business Activities accelerated in January. The index increased to 56.3 from 54.3.
Tomorrow, Challenger Job Cuts for January will be announced at 7:30 ET while weekly initial claims, December trade deficit, and fourth quarter productivity data will be released at 8:30 ET.
"Nasdaq Composite -4.0% YTD
"S&P 500 -5.2% YTD
"Russell 2000 -5.8% YTD
"Dow Jones Industrial Average -6.9% YTD

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