Day Traders Diary


The stock market finished the Monday session on a modestly higher note, but the S&P 500 (+0.1%) could not keep pace with the Russell 2000 (+0.9%). Similar to the Russell 2000, the Nasdaq (+0.3%) displayed relative strength, while the Dow Jones Industrial Average (+0.1%) settled just ahead of the S&P 500.
Equity indices climbed out of the gate with the early sentiment boosted by a set of acquisitions in three influential sectors; however, the intraday strength did not last as participants opted to take some money off the table after the Dow Jones Transportation Average surrendered its morning gain after outpacing the broader market over the past few weeks.
The largest S&P 500 sector received early support from chipmakers after Hittite Microwave (HITT 77.87, +17.31) agreed to be acquired by Analog Devices (ADI 55.31, +2.62) for $78/share. Shares of HITT surged 28.6%, but the PHLX Semiconductor Index narrowed its gain to 0.2% by the close.
Meanwhile, the broader tech sector (+0.3%) also slipped into the close, but was able to eke out a modest gain with help from its largest component. Apple (AAPL 93.70, +1.48) rose 1.6% on its first day of trading after the recent 7:1 share split.
Outside of technology, the remaining cyclical sectors saw a mixed finish. Consumer discretionary and energy settled in line with the S&P 500, materials (-0.3%) lagged, while financials (+0.4%), and industrials (+0.5%) outperformed.
The industrial sector finished ahead of the broader market, but the strength among defense contractors (PHLX Defense Index +0.8%) masked the underperformance of transport stocks. The Dow Jones Transportation Average was up as much as 0.6% in the late morning, but could not hold its gain into the close, ending flat. It is worth mentioning that today's underperformance took place after the bellwether complex surged nearly 8.5% since the start of the quarter versus a 4.2% gain for the S&P 500 over the same period.
While most cyclical sectors finished in line with or ahead of the broader market, the same could not be said for the four defensive groups. The telecom services sector tacked on 0.1%, while consumer staples (-0.1%), health care (-0.5%), and utilities (-0.7%) settled in the red.
Consumer staples spent the bulk of the session in negative territory, but shares of Hillshire Brands (HSH 62.06, +3.14) jumped 5.3% after Tyson Foods (TSN 37.50, -2.62) confirmed its offer to acquire the company for $63/share.
Also of note, the health care sector diverged from biotechnology, with the latter receiving a boost from Merck's (MRK 57.94, +0.09) offer to acquire Idenix Pharmaceuticals (IDIX 23.79, +16.56) for $24.50/share, which represents a gargantuan premium of 239% to Friday's closing price. Meanwhile, the iShares Nasdaq Biotechnology ETF (IBB 248.03, +1.94) advanced 0.8%.
On the fixed income side, Treasuries slumped overnight, but reclaimed a portion of their losses during the session. Ultimately, the 10-yr note shed five ticks, pushing its yield higher by two basis points to 2.61%.
Light participation continued to plague the market at the start of the week with only 595 million shares changing hands at the NYSE.
Tomorrow, the Wholesale Inventories report for April ( consensus 0.3%) and the April Job Openings and Labor Turnover Survey will both be released at 10:00 ET.

S&P 500 +5.6% YTD
Nasdaq Composite +3.8% YTD
Dow Jones Industrial Average +2.2% YTD
Russell 2000 +1.0% YTD

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