Day Traders Diary


The major averages rallied on Wednesday, which allowed the Dow (+1.0%), Nasdaq (+0.9%), and S&P 500 (+0.8%) to reclaim yesterday's losses. For its part, the Russell 2000 advanced 0.5% despite a brief dip into the red that took place in the morning.
Even though small caps endured an intraday hiccup, that short-lived weakness had little impact on the S&P 500, which rallied at the open before spending the bulk of the trading day in a six-point range. For the most part, the index was unperturbed by the underperformance of small caps, while also showing little reaction to the FOMC minutes from the April 29-30 meeting.
To be fair, the lack of a reaction to the minutes reflected the lack of new information within the minutes. The document revealed a discussion of the expected path to an eventual rate hike, but there was no mention regarding the potential timing. The minutes also indicated that the committee sees inflation reaching the 2.0% target in the next "few" years with little risk of spillover inflation resulting from fueling payroll growth.
Interestingly, the Treasury market was not too concerned with the Fed mapping out its exit strategy as the 10-yr note registered its low when the minutes were released, before climbing higher into the close. The 10-yr note narrowed its loss to six ticks, while the benchmark yield increased two basis points to 2.53%.
All ten sectors posted gains with cyclical groups faring a bit better than their defensive counterparts. Of the six growth-sensitive sectors, five settled in line or ahead of the S&P 500. The financial sector (+0.8%) provided leadership through the first half of the session, but energy (+1.1%) and consumer discretionary (+1.2%) overtook financials during the afternoon.
The consumer discretionary sector finished in the lead even as quarterly earnings from a handful of retailers disappointed. American Eagle Outfitters (AEO 10.60, -0.73), PetSmart (PETM 57.02, -5.17), and Lowe's (LOW 45.41, -0.11) ended lower in reaction to below-consensus earnings and/or guidance, while Target (TGT 57.20, +0.59) was able to post a solid gain of 1.0% after its report was dubbed 'better than feared.' Also of note, Tiffany (TIF 96.30, +8.07) surged 9.2% following its solid results.
On the countercyclical side, telecom services and utilities ended little changed, while health care (+0.8%) settled in line with the broader market. The consumer staples sector (+0.6%) spiked into the close as shares of Lorillard (LO 62.63, +5.90) surged 10.4% amid reports Reynolds American (RAI 59.77, +2.51) is in discussions to acquire Lorillard.
Today's participation was well below average with the final tally of 574 million shares coming in just ahead of Monday's total that marked the second-lowest volume of the year.
Economic data was limited to the weekly MBA Mortgage Index, which rose 0.9% to follow last week's increase of 3.6%. Despite the headline increase, purchase applications declined 3.0%, while the overall index was driven higher by a 4.0% gain in refinancing applications.
Tomorrow, weekly initial claims ( consensus 305K) will be released at 8:30 ET, while the Existing Home Sales report for April (consensus 4.66 million) and the April Leading Indicators report (consensus 0.5%) will cross the wires at 10:00 ET.

S&P 500 +2.2% YTD
Dow Jones Industrial Average -0.3% YTD
Nasdaq Composite -1.1% YTD
Russell 2000 -5.0% YTD

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