Day Traders Diary


The major averages finished the month of May on a mixed note. The S&P 500 added 0.2%, locking in a monthly gain of 2.1%, while the Nasdaq Composite (-0.1%) and Russell 2000 (-0.5%) lagged. The two indices narrowed their monthly gains to 3.1% and 0.8%, respectively.

Outside of the relative weakness among small-cap issues, the Friday session was very quiet as evidenced by the S&P 500 spending the entire trading day in a seven-point range. Similarly, intraday volume was largely in line with yesterday's session, which saw the lowest volume of the year, but today's final tally was boosted by semi-annual MSCI rebalancing. As a result, more than 900 million shares changed hands at the NYSE floor.

Overall, countercyclical sectors fared better than the growth-sensitive side of the market. In fact, all four defensively-oriented sectorsconsumer staples (+0.7%), health care (+0.3%), telecom services (+0.3%), and utilities (+0.8%)outperformed, while five of six cyclical sectors were unable to keep up with the S&P 500. Meanwhile, the financial sector (+0.2%) settled in line with the S&P 500 after spending the bulk of the session just above its flat line.

Interestingly, the health care sector was able to finish among the leaders even as biotechnology followed in the footsteps of the Russell 2000. The iShares Nasdaq Biotechnology ETF (IBB 239.59, -1.37) lost 0.6%. Furthermore, the underperformance of biotech weighed on the Nasdaq, which also had to contend with losses among some top-weighted technology components.

Specifically, the largest Nasdaq componentApple (AAPL 633.00, -2.38)shed 0.4%, but it is worth mentioning the decline followed a big rally over the past two weeks. Despite today's loss, the largest tech stock surged 7.3% in May. Outside of Apple, Cisco Systems (CSCO 24.62, -0.06) and Oracle (ORCL 42.02, -0.18) also contributed to the underperformance of the Nasdaq.

Elsewhere, the consumer discretionary sector ended just behind the broader market even as participants received another dose of disappointing earnings from the retail space. Express (EXPR 12.61, -1.02), Guess? (GES 25.50, -1.38), and Pacific Sunwear (PSUN 2.42, -0.52) lost between 5.1% and 17.7% in reaction to below-consensus earnings and/or guidance, while the SPDR S&P Retail ETF (XRT 83.78, +0.34) added 0.4%.

Also of note, today's disparity between small caps and blue chip listings did little to scare investors as evidenced by a 1.2% decline in the CBOE Volatility Index (VIX 11.43, -0.14), which ended the day just a shade above its lowest close of the year. On the fixed income side, Treasuries alternated between gains and losses, but ultimately settled flat with the 10-yr yield at 2.47%.

Reviewing today's data: "Personal Income increased an in-line 0.3% in April, but consumption fell 0.1% against the 0.2% increase that was expected by the consensus. Once again, the report failed to show any pent-up demand resulting from the severe winter weather. Core PCE prices rose 0.2%, as expected.
"The Chicago PMI increased to 65.5 in May from 63.0 in April. The consensus expected the Chicago PMI to fall to 60.3. New order levels accelerated as the related index increased to 70.2 in May from 68.7 in April. That did not translate into stronger production as the index fell to 64.4 in May from 70.5. Instead, much of the new orders growth was marketed for backlogs as that index increased to 61.4 from 54.9. The strength of the backlogs index should support elevated production levels.
"The final reading for the May University of Michigan Consumer Sentiment Index increased to 81.9 from 81.8 in the preliminary reading. Consumer sentiment is still down from an 84.1 reading in April. The consensus expected the Consumer Sentiment Index to fall to 81.4. The Current Conditions Index fell to 94.5 in the final May reading from 95.1 in the preliminary reading. The Consumer Expectations Index increased to 73.7 from 73.2.
On Monday, the ISM Index for May and April Construction Spending will be reported at 10:00 ET

"S&P 500 +4.1% YTD
"Dow Jones Industrial Average +0.9% YTD
"Nasdaq Composite +1.6% YTD
"Russell 2000 -2.4% YTD

All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.