Day Traders Diary


The stock market lumbered and slumbered through most of Friday's session, but it woke up late in the day and ended on an upbeat note. The major indices all scored modest gains, the most notable of which was the Russell 2000, which ducked into correction territory again with an early 0.7% decline only to come rallying back to finish Friday up 0.4% and out of the "correction zone."
There wasn't a specific news catalyst behind the late surge. The explanation that it was related to options expiration activity can't be dismissed and it would fit in line with other explanations that included short-covering activity, the ability of the Russell 2000 to fight back once again from a notable decline, and renewed buying interest in some of the market's most influential sectors that had been lagging for most of the day.
The financial sector is a case in point. It was down 0.5% with about an hour to go in the trading session and it finished the day up 0.1%. Similarly, the technology sector, which was nearly flat entering the final hour, ended the session up 0.6%. The energy sector (-0.3%) was the only sector to end with a loss.
The major indices had been confined to tight trading ranges for most of the session as big moves were reserved largely for individual stocks like J.C. Penney (JCP 9.69, +1.32), which rallied after the embattled retailer reported better than expected earnings results and guidance.
The telecom services sector (+1.4%) was the only sector that had been showing any notable strength throughout the day. That was owed primarily to Verizon (VZ 49.07, +1.11), which benefited from the disclosure that Berkshire Hathaway established a new position in the stock during the first quarter. Otherwise, there wasn't a lot of movement of note in the remaining sectors until the final 90 minutes.
That was true for the Treasury market, too. There wasn't a lot of movement there despite the report that housing starts surged 13.2% in April to a seasonally adjusted annual rate of 1.072 mln units ( consensus 975,000) while building permits rose 8.0% to 1.08 mln ( consensus 1.008 mln).
The Treasury market's steady state after the report, and a weaker than expected University of Michigan Consumer Sentiment report for May, looked to be a distraction for equity traders who were still trying to make sense of Thursday's big drop in yield in the 10-yr note. Some late selling activity, though, had the 10-yr probing its worst levels of the day as stocks were staging a rally heading into the close. The 10-yr note, which had been down four ticks for most of the day, was down nine ticks and yielding 2.52% when the closing bell rang.
Thanks to the late burst of buying interest, the Nasdaq was able to finish the week with a gain. The S&P 500, however, just missed.
Trading volume at the NYSE hit 763 mln shares on Friday, which was the heaviest all week. That was not surprising given the low totals earlier in the week and the kicker provided by the monthly options expiration.
The coming week could be characterized by low volume again. There isn't much on either the economic or earnings calendars and the Memorial Day holiday will be waiting at the end of the week.

S&P 500 +1.6%
Dow Jones Industrial Average -0.5%
Nasdaq Composite -2.1%
Russell 2000 -5.4%

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