Day Traders Diary


The stock market began the new trading week on a defensive note after tensions between Russia and Ukraine escalated over the weekend. The Dow Jones Industrial Average (-0.9%) paced the decline while the S&P 500 lost 0.8% with all ten sectors ending in the red.

Over the weekend, Russian troops increased their presence around several key strategic points located in the Crimean peninsula in Southern Ukraine. The troop deployment was authorized by the Russian parliament while Ukrainian authorities described the actions as an 'invasion.'

Another concerning headline crossed in the late morning when Ukraine's Defense Minister said that troops in the Crimea have been given an ultimatum to surrender by 22:00 ET or 'face a storm.' The news knocked the market to fresh lows, but was followed by comments from Russia's Ministry of Defense, claiming no such ultimatum had been presented.

With plenty of uncertainty abound, equities sold off broadly while traditional safe-haven assets received a bid. Treasuries settled on their highs with the benchmark 10-yr yield down five basis points at 2.60% while the Dollar Index (80.08, +0.39) gained 0.5%.

Elsewhere, commodities saw interest with crude oil climbing 2.4% to $105.00/bbl while gold futures settled higher by 2.2% at $1350.40/ozt. In turn, the strength in gold gave a boost to miners, sending the Market Vectors Gold Miners ETF (GDX 26.30, +0.42) higher by 1.6%.

The outperformance of miners helped the materials sector (-0.2%) finish ahead of the broader market. Outside of materials, consumer staples (-0.5%), energy (-0.6%), health care (-0.7%), and telecom services (-0.5%) were able to outperform the S&P 500.

On the downside, the technology sector (-0.9%) spent the entire session behind the remaining nine groups. Strikingly, the largest sector component, Apple (AAPL 527.76, +1.52), eked out a modest gain of 0.3% while other large components like Google (GOOG 1202.69, -12.69), Oracle (ORCL 38.51, -0.60), Microsoft (MSFT 37.78, -0.53), and SAP (SAP 77.74, -2.55) lost between 1.1% and 3.2%.

With stocks under considerable pressure, participants showed significant interest in volatility protection as indicated by the CBOE Volatility Index (VIX 16.29, +2.29), which ended at levels last seen in early February.

Economic data included three reports:
Construction spending increased 0.1% in January after increasing an upwardly revised 1.4% (from 0.1%) in December. The consensus expected construction spending to decline 0.1%. It is difficult to reconcile the increase in January construction spending and the theory that the recent downturn in economic activity was weather related. If weather was negatively impacting the economy, then construction -- which largely takes place outside -- should have felt the brunt of the negative effects. The fact that construction spending held up relatively well in January, especially considering the huge upward revision to December data, tells us that the weather theory is overblown.
In a role reversal, the ISM Manufacturing Index improved in February to 53.2 from 51.3 in January while the consensus expected an increase to 51.3. In January, the Federal Reserve regional manufacturing surveys showed stronger manufacturing conditions. Yet, the national ISM Index recorded its biggest one-month fall since October 2008. In February, those same regional manufacturing surveys deteriorated. In a hint of irony, the national index showed sizable growth this month. As the trends clearly show, the national and regional indicators do not serve as a good guide on manufacturing levels.
Personal income increased 0.3% in January after being unchanged in December. That was exactly what the consensus expected. Personal spending levels increased 0.4% in January after increasing a downwardly revised 0.1% (from 0.4%) in December. The consensus expected personal spending to increase 0.1%.
There is no economic data on tomorrow's schedule.

Nasdaq Composite +2.4% YTD
Russell 2000 +1.3% YTD
S&P 500 -0.2% YTD
Dow Jones Industrial Average -2.5% YTD

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