Day Traders Diary


The major averages finished the Tuesday session near their lows with the Russell 2000 (-1.0%) leading the slide. The S&P 500 lost 0.5% with nine sectors ending in the red.
Equities indices started the day with modest gains and spent the first two hours of action in the neighborhood of their flat lines. Although the early trade lacked clear sector leadership, that could have been overlooked due to the strength among heavily-weighted sectors like health care (-0.3%), technology (-0.2%), and consumer staples (unch). The relative strength of the three groups kept the market afloat in the early going considering they account for nearly 42.0% of the entire S&P 500.
However, another influential sectorfinancials (-0.7%)was a bit more reluctant and never pulled away from its flat line. Fittingly, the group was among the first to show weakness when the broader market slipped into the red.
Interestingly, the first wave of selling among financials coincided with a notable drop in copper futures, which have been pressured recently amid worries regarding the health of China's corporate sector. Today, the red metal fell 2.8% to $2.947/lb, a level last seen in mid-2010. Furthermore, the base metal extended its March decline to 7.5%. Considering copper's importance to global industry, significant weakness in the price of the metal can be seen as a cautious signal regarding the overall health of the global economy. Similarly, the financial sector is also viewed as a vital factor in global growth.
Although financials lagged, today's retreat came after the sector led last week's advance. Despite today's loss, the sector remains higher by 1.4% so far this year versus a 1.0% gain for the S&P 500. Top sector components with global exposure, however, have not seen comparable gains. Goldman Sachs (GS 169.89, -3.62) lost 2.1% today, widening its year-to-date decline to 3.4% while JPMorgan Chase (JPM 58.19, -1.01) slumped 1.7%, ending the session with a 0.5% loss so far in 2014.
Commodity-linked energy (-1.2%) and materials (-1.0%) also contributed to the slide while crude oil lost 1.1%, ending at $99.99/bbl.
Also of note, the huge intraday reversal in the fuel cell stocks today was another focal point that may have encouraged investors to take some money off the table. Plug Power (PLUG 6.92, -3.39), Fuel Cell (FCEL 3.28, -0.65), and Ballard Power (BLDP 5.10, -1.78), for instance, ended down 48.6%, 30.8%, and 39.1%, respectively, from today's high. A caustic report on Plug Power out of Citron Research contributed to the sharp reversal.
Treasuries held modest intraday losses, but jumped to highs as the market slid into the red. The benchmark 10-yr yield ended lower by two basis points at 2.76%.
Today's selling pressure contributed to demand for volatility protection, sending the CBOE Volatility Index (VIX 14.81, +0.61) higher by 4.3%.
Participation was below average with 630 million shares changing hands at the NYSE floor.
Today's economic data was limited to the Wholesale Inventories report:
Wholesale inventories increased 0.6% in January after increasing an upwardly revised 0.4% (from 0.3%) in December. The consensus pegged inventory growth at 0.4%. Inventory growth in the durables sector slowed, increasing 0.4% in January after a 1.2% gain in December. Nondurable inventories rose 0.8% in January after falling 0.9% in December. Unfortunately, the strong gain in inventories was likely not planned. Sales, which edged up a slight 0.1% in December, crashed in January and fell 1.9%.
Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while the Treasury Budget for February will be reported at 14:00 ET.

Nasdaq Composite +3.1% YTD
Russell 2000 +2.3% YTD
S&P 500 +1.0% YTD
Dow Jones Industrial Average -1.4% YTD

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