Day Traders Diary


The major averages spent the Thursday session in a daylong retreat that placed the Nasdaq (-3.1%) below its 100-day moving average, while the S&P 500 (-2.1%) finished below its 50-day average. The Dow Jones Industrial Average held up a bit better, but the price-weighted index posted a sharp loss (-1.6%) nonetheless.

Even though the major averages finished yesterday's session on an upbeat note, the sentiment began deteriorating during the overnight session when China reported a surprise trade surplus of $7.71 billion, which was due to disappointing import (-11.3% versus expected 2.4%) and export (-6.6% versus expected 4.0%) figures. This renewed some of the concerns about the strength of the Chinese economy, which have been present since the start of the year. Strikingly, markets in Hong Kong (+1.5%) and China (+1.4%) outperformed, but that was likely due to the announcement that Beijing would allow as much as CNY23.50 billion of cross-border equity trading.

Another major equity index, Japan's Nikkei, ended flat after starting with a solid 1.3% gain. The retreat from highs took place as the Japanese yen strengthened, sending the dollar/yen pair into the 101.50 area.

The caution that was exhibited in the foreign exchange market appeared to have faded by this morning, but the yen began strengthening ahead of the New York open, and returned to the overnight lows not long after.

Meanwhile, equities began their retreat shortly after the opening bell, with the Nasdaq Composite leading the slide.

By and large, there was some indiscriminate selling taking place as the lack of follow through from yesterday's rally piqued concerns about a larger scale correction being under way. In turn, the sharp price pullbacks started to raise worries about collateral damage among highly leveraged accounts that could be facing some margin calls. As those worries percolated, participants reduced their risk exposure with a sell-first-ask-questions-later disposition.

All ten sectors ended in the red with the largest four groupstechnology (-2.5%), financials (-2.4%), health care (-3.2%), and consumer discretionary (-2.5%)posting the largest losses.

Health care spent the duration of the trading day at the bottom of the leaderboard, with continued weakness in biotechnology exacerbating the decline. The iShares Nasdaq Biotechnology ETF (IBB 221.89, -13.19) tumbled to its 200-day moving average before inching up from that level into the close for a loss of 5.6%.

Elsewhere, technology and discretionary shares suffered from noteworthy weakness among momentum names. (AMZN 317.11, -14.69), Google (GOOG 540.95, -23.19), Facebook (FB 59.16, -3.25), and Netflix (NFLX 334.73, -18.30) surrendered between 4.1% and 5.2%, while smaller momentum-favorites fared even worse. FireEye (FEYE 49.75, -6.64), Tableau Software (DATA 65.52, -7.35), and Yelp (YELP 63.47, -7.78) all plunged more than 10.0% apiece.

The financial sector also ended among the laggards, with JPMorgan Chase (JPM 57.40, -1.87) and Wells Fargo (WFC 47.71, -1.39) falling 3.2% and 2.8%, respectively ahead of tomorrow morning's quarterly reports.

While seven sectors posted losses of 1.0% or more, defensively-oriented consumer staples (-0.9%), telecom services (-0.1%), and utilities (-0.4%) outperformed.

With stocks ending on their lows, demand for volatility protection sent the CBOE Volatility Index (VIX 15.77, +1.95) higher by 14.1%, but the near-term volatility measure ended below highs established earlier in the week.

Treasuries posted gains, but finished below their midday highs. The benchmark 10-yr yield fell five basis points to 2.65%.

Participation was a bit above average as 786 million shares changed hands at the NYSE.

Looking back at today's data:
"The weekly initial claims level fell to 300,000its lowest point since May 2007from an upwardly revised 332,000 (from 326,000), while the consensus expected the claims level to fall to 325,000. The size of the drop in claims was unusual, and while the Department of Labor did not issue any statements explaining the decline, there tends to be normal seasonal volatility over the first few weeks of April due to yearly calendar shifts in the Easter holiday.
"Export prices, excluding agriculture, increased 0.5% in March after increasing 0.6% in the prior reading. Excluding oil, import prices rose 0.3%, which follows last month's downtick of 0.1%.
"The Treasury Budget for March showed a deficit of $36.90 billion, which followed the prior month's deficit of $106.50 billion. The consensus expected the deficit to hit $36.00 billion.
Tomorrow, March PPI ( consensus 0.1%) and Core PPI (consensus 0.1%) will be released at 8:30 ET, while the preliminary reading of the Michigan Sentiment survey for April (consensus 81.0) will cross the wires at 9:55 ET.
"S&P 500 -0.8% YTD
"Dow Jones Industrial Average -2.5% YTD
"Nasdaq Composite -2.9% YTD
"Russell 2000 -3.0% YTD

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