Day Traders Diary


The stock market ended the Tuesday session on a lower note despite seeing early strength. The Dow Jones Industrial Average and S&P 500 posted respective losses of 0.7% and 0.6%, while the Nasdaq Composite shed 0.4%.

Equity indices displayed modest losses at the start, but were quick to regain their flat lines after a pair of economic data points surprised to the upside. Briefly, the New Home Sales report for May came in well ahead of estimates (504K versus consensus 440K), while the Consumer Confidence report (85.2) registered its highest reading since early 2008.

The economic news gave a boost to the consumer discretionary sector (-0.2%) and especially homebuilders. DR Horton (DHI 23.89, +0.29) and Toll Brothers (TOL 36.56, +0.43) both jumped 1.2%, while the iShares Dow Jones US Home Construction ETF (ITB 24.36, +0.21) advanced 0.9%. For its part, the discretionary sector fell into the red during the afternoon when the overall market reversed and surrendered its gain.

Before looking at the afternoon reversal, we'd like to point out that the discretionary space was just one of three influential sectors that slumped into the close.

The largest S&P 500 sector-technology (-0.5%)-saw intraday strength that was fueled by gains among chipmakers after Micron (MU 32.50, +1.24) reported better than expected earnings. The stock settled higher by 4.0%, while the PHLX Semiconductor Index lost 0.7% after being up as much as 0.7%.

Elsewhere, the health care sector (unch) surged out of the gate in reaction to positive cystic fibrosis treatment trial data from Vertex Pharmaceuticals (VRTX 93.53, +26.92). VRTX surged 40.4%, while the iShares Nasdaq Biotechnology ETF (IBB 255.48, +2.57) narrowed its gain to 1.0% after being up more than 2.0% intraday.

The intraday gains among three of the four largest sectors were not enough to prevent the key indices from tumbling into the red. The afternoon turnaround occurred shortly after the Wall Street Journal reported that a Syrian fighter jet struck targets in western Iraq, killing 50 people. The news was followed by broad-based selling activity that saw the energy sector (-2.0%) lead to the downside.

In all likelihood, the noteworthy dive was a function of profit taking, considering the sector trimmed its quarter-to-date gain to 10.6%. For comparison, no other sector shows an increase of more than 4.9% for the second quarter.

Meanwhile, the second-best sector of the second quarter-utilities-ended in the lead, climbing 0.3%.

Treasuries settled on their highs after spending the entire session in positive territory. The benchmark 10-yr yield fell five basis points to 2.58%.

Participation remained light with 635 million shares changing hands at the NYSE floor.

Economic data featured the April Case-Shiller 20-city Index, April FHFA Housing Price Index, New Home Sales for May, and the June Consumer Confidence report:
The Case-Shiller 20-city Home Price Index for April rose 10.8%, while an 11.6% increase had been expected by the consensus. This followed the previous month's increase of 12.4%.
The April Housing Price Index from the FHFA was unchanged, which followed an unrevised uptick of 0.7% observed during the prior month.
New home sales increased 18.6% in May to 504,000 from a downwardly revised 425,000 (from 433,000). The consensus expected new home sales to increase to 440,000.
Sales topped 500,000 for the first time since May 2008.
The spike in new home sales coincided with a large decline in mortgage rates. As rates turn higher, it could dent future sales growth.
The Conference Board's Consumer Confidence Index increased to 85.2 in June from a downwardly revised 82.2 (from 83.0). The consensus expected the index to increase to 84.0.
The index climbed to its highest point since the recession began in January 2008.
A surging stock market and general improvements in overall employment conditions were enough to offset higher gasoline/oil prices and drive consumer confidence to a 6-year high.
Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET, while Durable Orders for May ( consensus 0.4%) and the third estimate of Q1 GDP (consensus -1.8%) will cross the wires at 8:30 ET.

S&P 500 +5.5% YTD
Nasdaq Composite +4.2% YTD
Dow Jones Industrial Average +1.5% YTD
Russell 2000 +0.8% YTD

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