Day Traders Diary


The stock market ended the Tuesday session on a modestly higher note with participants gearing up for the latest policy directive from the FOMC, which will be released on Wednesday afternoon.
Small- and mid-cap stocks led the way with the Russell 2000 and S&P Mid Cap 400 climbing 0.7% and 0.8%, respectively. Meanwhile, the S&P 500 added 0.2% with five sectors posting gains.
Overall, cyclical groups did the bulk of the grunt work as five of six growth-sensitive sectors advanced. Financials (+0.9%) seized the lead at the start of the session and never looked back. Top-weighted components like Bank of America (BAC 15.59, +0.31) and Morgan Stanley (MS 32.50, +0.79) posted respective gains of 2.0% and 2.5%, while the entire sector extended its June advance to 1.9%.
Financials notwithstanding, gains in other areas were much more subdued as the second-best sector of the dayconsumer discretionaryadded just 0.3%. Retailers contributed to the strength with the SPDR S&P Retail ETF (XRT 86.28, +0.74) climbing 0.9%, while shares of Netflix (NFLX 443.65, +13.39) jumped 3.1% amid reports indicating lawmakers are finalizing a proposal that would ban internet fast lanes.
Also of note, the technology sector (+0.2%) contributed to the outperformance of the Nasdaq Composite (+0.4%), but it is worth mentioning that the bulk of the strength came from high-beta chipmakers. The PHLX Semiconductor Index jumped 0.7% as 25 of its 30 components finished in the green.
Although most growth-oriented sectors posted gains, that was not the case with the energy space (-0.2%). The sector trimmed its loss into the close, but could not turn positive as its top-weighted listingExxonMobil (XOM 102.42, -0.50) weighed. Shares of ExxonMobil fell 0.5%, while crude oil slumped into the pit close, diving 0.6% to $106.28/bbl.
Meanwhile, the other commodity-related sector, materials (+0.2%), received support from steelmakers and miners. The Market Vectors Steel ETF (SLX 46.55, +0.41) rose 0.9% and Market Vectors Gold Miners ETF (GDX 24.12, +0.14) added 0.6% even as gold futures retreated.
The yellow metal slipped 0.3% to $1271.80/ozt, but still ended above its pre-CPI levels. Gold traded at $1265 ahead of the report and fell to $1260 immediately after, before spending the remainder of the day in a slow climb.
On the fixed income side, Treasuries fell to lows following this morning's data and continued their retreat into the close. The 10-yr yield rose five basis points to 2.65%.
Participation was well below average with less than 600 million shares changing hands at the NYSE.
Economic data was limited to May housing starts/building permits and CPI:
Housing starts fell 6.5% in May to 1.001 million from a downwardly revised 1.071 million (from 1.072 million) in April. The consensus expected housing starts to fall to 1.028 million. Multifamily construction fell 7.6% to 376,000. There is still room for more declines over the next few months. The bigger concern was the trend in single-family construction. That type of construction is normally stable, but these starts fell 5.9% in May to 625,000. That was the lowest level since 589,000 single-family homes were started in February. Hopefully, this was just a one-month blip but it warrants closer evaluation.
Consumer prices increased 0.4% in May, up from a 0.3% increase in April. That was the largest increase since February 2013. The consensus expected the CPI to increase 0.2%.
Contrary to the trends in the PPI, both food and energy prices contributed positively to overall consumer price growth in May.
Food prices increases accelerated in May. After increasing by 0.4% for each of the last three months, prices rose 0.5% in May. That was the largest increase since August 2011. Food at home prices rose 0.7%, the biggest increase since July 2011.
Energy prices increased 0.9% in May on a 2.3% increase in electricity costs and a 0.7% increase in gasoline costs. Some of this gain was due to seasonal credits that temporarily lowered electricity prices in California in April and returned to normal in May.
Excluding food and energy, core CPI increased 0.3% in May after increasing 0.2% in both March and April. That was the largest increase in core prices since August 2011. The consensus expected these prices to increase 0.2%.
Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET, while Q1 Current Account Balance ( consensus -$97.80 billion) will cross the wires at 8:30 ET. Lastly, the FOMC will release its latest policy directive at 14:00 ET.

S&P 500 +5.1% YTD
Nasdaq Composite +3.9% YTD
Dow Jones Industrial Average +1.4% YTD
Russell 2000 +1.0% YTD

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