Day Traders Diary


The major averages finished the session on a modestly higher note, but not before heavy selling pressure sent the Nasdaq Composite (+0.3%) for a test of its 200-day moving average. The S&P 500, meanwhile, added 0.7% with all ten sectors posting gains.
Equities climbed at the open with the advance built on the relative strength of biotechnology and other momentum names. Despite the solid early gains in those areas, the market began fading from its high as multiple reports pointed to an escalation of tensions in Ukraine. Specifically, a skirmish reportedly took place at the Kramatorsk airbase, but there were inconsistencies with regard to the number of injured. Some reports put the number of casualties between four and 11, while others said there were no casualties. After these reports made the rounds, Ukraine's acting President Oleksandr Turchynov was quoted by Interfax as saying the airfield has been retaken from pro-Russian militants.
With participants watching the news from Ukraine, stocks continued their retreat into the early afternoon, while bonds rallied. The defensive sentiment was also present in the foreign exchange market, where the yen strengthened to 101.50 against the dollar.
Strikingly, equity indices notched their lows just after 13:00 ET and spent the next three hours in a sharp rally back into the green in a move that was accompanied by the return of yen weakness that sent the dollar/yen pair to 101.85.
The rally in equities and the dollar/yen pair seemed to follow reports from Nikkei, suggesting sources think Japan will lower its economic outlook in its upcoming April 17 report. Such a headline presumably fueled some speculation that the downgrade will ultimately invite more policy stimulus from Japan, which was music to the ears of a market that has cheered accommodative monetary policy for quite some time.
As a result of the afternoon rally, the S&P 500 returned to its morning high, while the Nasdaq clawed its way back into the green. Like the Nasdaq, biotechnology climbed off its lows, but the iShares Nasdaq Biotechnology ETF (IBB 217.61, +2.24) was unable to reclaim its 200-day moving average. The biotech ETF added 1.0%, while the broader health care sector advanced 1.1%. Contributing to the sector's strength were shares of Johnson & Johnson (JNJ 99.20, +2.06), which added 2.1% after the company beat on earnings.
Elsewhere, energy (+1.3%) and financials (+0.9%) spent the entire day trading ahead of the broader market, which facilitated the afternoon rebound.
Also of note, the utilities sector (+1.3%) ended ahead of the remaining groups after climbing steadily throughout the session. The rate-sensitive sector extended its year-to-date gain to 11.8%, which speaks to the overall cautious posture that has been exhibited by the market so far in 2014.
Treasuries posted gains, but retreated from their midsession highs during the afternoon rally in equities. The benchmark 10-yr yield slipped three basis points to 2.62%.
Participation was a bit above average as 771 million shares changed hands at the NYSE floor.
Reviewing today's data:
Consumer prices increased 0.2% in March, up from a 0.1% gain in February. The consensus expected the CPI to increase 0.1%. Excluding food and energy, core prices increased 0.2% in March and ended a string of three consecutive months of 0.1% gains. The consensus expected these prices to increase 0.1%. The surprises in both the headline and core indices were mainly the result of stronger-than-expected housing costs. The shelter index increased 0.3% in March and accounted for two-thirds of the gain in the core consumer price index. Housing costs increased 2.7% over the last 12 months, which was the largest yearly increase since March 2008. As expected, drought conditions in the west contributed to stronger-than-normal growth in food prices. Food costs increased 0.4% for a second consecutive month. Year-over-year, food prices are up 1.2%, which is the largest yearly gain since August 2012.
The Empire Manufacturing Survey for April registered a reading of 1.3, which was down from the prior month's reading of 5.6. Economists polled by expected the survey to improve to 7.5.
The April NAHB Housing Market Index rose to 47 from 46 while the consensus expected the reading to increase to 50.
Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET, while March Housing Starts will be announced at 8:30 ET. March Industrial Production and Capacity Utilization will both be reported at 9:15 ET, while the day's data will be topped off with the Federal Reserve's Beige Book for April. The report will be released at 14:00 ET.

S&P 500 -0.3% YTD
Dow Jones Industrial Average -1.9% YTD
Nasdaq Composite -3.4% YTD
Russell 2000 -3.7% YTD

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