Day Traders Diary


The stock market ended the Thursday session on a mixed note ahead of Friday's nonfarm payrolls report for February ( consensus 163K). The Dow Jones Industrial Average (+0.4%) and S&P 500 (+0.2%) posted modest gains while the Nasdaq Composite (-0.1%) lagged throughout the session.

Equities began the trading day on an upbeat note following comments from the Bank of England and the European Central Bank, both of which reaffirmed their commitment to maintaining their current, accommodative, policy stance.

The reminder of continued monetary support overshadowed concerns about the escalation of the situation in Ukraine where the Crimean parliament voted to join the Russian Federation and hold a referendum on the matter in just over a week.

Another issue that was put on the backburner was the continuation of retailer woes as indicated by disappointing quarterly results from Children's Place (PLCE 50.66, -4.04), Costco (COST 113.26, -3.21), and Staples (SPLS 11.35, -2.05). Costco weighed on the consumer staples sector (-0.04%) while the discretionary space (+0.3%) was able to end among the outperformers thanks to gains among quick-service restaurant names. Yum! Brands (YUM 77.29, +2.48) made a significant contribution, climbing 3.3% following a Robert W. Baird upgrade to 'Outperform' from 'Neutral.'

Although the discretionary sector displayed relative strength, it was another cyclical group, financials (+0.7%), that spent the entire day in the lead. The financial sector outperformed for the third consecutive day, extending its week-to-date gain to 2.5% versus a 1.0% increase for the S&P 500.

Despite the relative strength of an influential group, the S&P 500 was knocked off session highs in the early afternoon when significant selling pressure among biotechnology weighed on the health care sector (-0.7%) and the Nasdaq Composite. The iShares Nasdaq Biotechnology ETF (IBB 261.14, -7.15) ended near its session low, down 2.7%. Also exerting pressure on the Nasdaq was the technology sector, which ended flat.

The afternoon weakness contributed to increased demand for volatility protection, sending the CBOE Volatility Index (VIX 14.20, +0.31) higher by 2.2%.

Treasuries ended modestly lower with the 10-yr yield up three basis points at 2.74%.

Participation was below average as 661 million shares changed hands on the NYSE floor.

Also of note, President Obama addressed the situation in Ukraine, touching on the following points: (1) the Crimea referendum to join Russia violates international law (2) there is an executive order that sanctions anyone threatening the sovereignty of Ukraine (3) Russia should allow international monitors into Ukraine and (4) Congress should resolve to support the IMF's capacity to help Ukraine with a loan facility.

Investors received four economic data points:

Initial claims for the week ending March 1 fell by 26,000 to 323,000 ( consensus 338,000). The Department of Labor said the decline coincided with strong winter storms, implying that layoffs were either deferred or individuals laid off were unable to file their unemployment claims.

Fourth quarter productivity was revised down to 1.8% ( consensus 2.5%) from 3.2%.

Unit labor costs declined 0.1% in the fourth quarter ( consensus -0.7%) versus an originally reported 1.6% drop. The improvement was the end result of an increase in hourly compensation (positive) combined with a drop in output (negative).

Factory orders declined 0.7% in January after declining a downwardly revised 2.0% (from -1.6%) in December. The consensus expected factory orders to decline 0.5%.

Tomorrow, February nonfarm payrolls, unemployment rate, hourly earnings, average workweek, and the January trade balance will all be reported at 8:30 ET while the January Consumer Credit report will be released at 15:00 ET.

Nasdaq Composite +4.2% YTD
Russell 2000 +3.8% YTD
S&P 500 +1.6% YTD
Dow Jones Industrial Average -0.9% YTD

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