Day Traders Diary


The stock market ended the holiday-shortened week on a mixed note as the Dow Jones Industrial Average shed 0.1%, while the S&P 500 added 0.1% with seven sectors posting gains.
Equity indices faced an uphill climb from the opening bell after disappointing quarterly results from Google (GOOG 536.10, -20.44) and IBM (IBM 190.04, -6.36) weighed on the early sentiment. Google reported earnings $0.15 below the Capital IQ consensus estimate on revenue of $15.42 billion (expected $15.52), while IBM revealed in-line earnings on revenue that was roughly $500 million below expectations.
The results from the two pressured the technology sector (-0.3%), which was down as much as 1.0% during early action. The sector was able to shed the bulk of its losses thanks to strength among chipmakers and other high-beta components. Chipmakers rallied throughout the session after upbeat earnings from SanDisk (SNDK 82.99, +7.14) and Taiwan Semiconductor (TSM 20.71, +0.56) underpinned the space. The broader PHLX Semiconductor Index, meanwhile, jumped 1.9%.
Even though Google and IBM pressured the market early on, equity indices were able to rebound with help from several other major listings that reported above-consensus results. General Electric (GE 26.56, +0.44), Goldman Sachs (GS 157.44, +0.22), Morgan Stanley (MS 30.76, +0.87), and PepsiCo (PEP 85.55, +0.78) all beat their estimates.
Also of note, the biotech space remained volatile with the iShares Nasdaq Biotechnology ETF (IBB 222.16, -0.57) spending some time on each side of its flat line. Furthermore, the ETF ended just above its 200-day moving average (220.19) after spending the past week near that key level.
Although the Nasdaq and S&P 500 posted modest gains, the Dow Jones (-0.1%) was unable to catch up to its peers as losses in several large components like IBM, American Express (AXP 86.22, -1.18), and UnitedHealth (UNH 75.78, -2.41) acted as a wet blanket on the price-weighted index.
Treasuries retreated steadily throughout the session, causing the benchmark 10-yr yield to add nine basis points to 2.72%. The slide took place amid reports from Geneva indicating representatives from the European Union, United States, Ukraine, and Russia have reached an agreement on steps aimed at de-escalating the crisis in Ukraine. The agreement was announced by Russia's Foreign Minister Sergei Lavrov, who also said Ukraine needs 'decentralization' and 'more regional powers.'
Trading volume was above average thanks to a boost in activity resulting from options expiration. As a result more than 800 million shares changed hands at the New York Stock Exchange.
Today's data was limited to two releases:
The initial claims level increased to 304,000 for the week ending April 12 from an upwardly revised 302,000 for the week ending April 5. The consensus expected the initial claims level to increase to 312,000. The Department of Labor stated that there were no special factors impacting the claims data. However, we remain skeptical of that. Over the past few years, the DOL has had extreme difficulties managing the seasonal adjustment factors around the Easter holiday. With Easter falling on a later date this year, we suspect that the claims are underreporting actual layoff levels. We expect some volatility in the next few weeks before the initial claims level settles back in the 320,000 -- 330,000 range by the beginning of May.
The Philadelphia Fed's Business Outlook increased to 16.6 in April from 9.0 in March. The consensus expected the index to fall to 8.6. There was a general strengthening across the board. Shipments spiked to 22.7 in April from 5.7 in March. Most of the gain was the result of a significant strengthening in new orders demand, 14.8 from 5.7. The gains in shipments, however, may not be sustainable. Unfilled orders softened as the related index fell to 2.0 in April from 2.6 in March. Without a steady supply of backlogs, weaker new orders will pull down shipments growth. The employment index increased to 6.9 in April from 1.7 in March.
Monday's data will be limited to the Leading Indicators report for March, which will be released at 10:00 ET.

S&P 500 +0.9% YTD
Dow Jones Industrial Average -1.0% YTD
Nasdaq Composite -1.9% YTD
Russell 2000 -2.1% YTD

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