Day Traders Diary


The stock market kicked off July on a strong note with small caps pacing the rally. The Nasdaq Composite and Russell 2000 jumped 1.1% and 1.0%, respectively, while the S&P 500 advanced 0.7% with nine sectors ending in the green.
Equities displayed early strength after economic data reported overnight and in the early morning indicated expanding manufacturing activity in China, Japan, the eurozone, and the U.S. Although some of the PMI readings missed estimates, they were all above 50, a level that represents the border between expansion and contraction. The data fostered the bullish tone, which was amplified by the arrival of new money at the start of the quarter.
In large part, today's advance was powered by four of the most influential sectors. Consumer discretionary (+1.1%), health care (+1.3%), financials (+0.6%), and technology (+1.1%) jumped to the top of the leaderboard at the open and held their ground throughout the session.
The health care sector was the top performer thanks in part to the relative strength of biotechnology. Regeneron (REGN 303.39, +20.92) surged 7.4%, while the broader iShares Nasdaq Biotechnology ETF (IBB 263.12, +6.09) advanced 2.4%. Furthermore, the outperformance of biotech boosted the Nasdaq Composite (+1.1%), which also drew strength from the technology sector.
Top-weighted tech components like Apple (AAPL 93.52, +0.59), Google (GOOGL 591.49, +6.82), and Qualcomm (QCOM 79.73, +0.53) rallied across the board, while chipmakers fared even better. The PHLX Semiconductor Index rose 1.4% with all 30 components posting gains.
Elsewhere, the discretionary sector stayed near the lead amid broad strength. Shares of Netflix (NFLX 473.10, +32.50) soared 7.4% in reaction to a Goldman Sachs upgrade, while home builders and retailers also charged ahead. The iShares Dow Jones US Home Construction ETF (ITB 25.09, +0.29) added 1.2% and SPDR S&P Retail ETF (XRT 87.47, +0.67) settled higher by 0.8%.
On the downside, the utilities sector (-1.0%) was the lone decliner amid some profit taking after the sector added 4.2% in June. Even though the rate-sensitive sector started the third quarter on a lower note, its year-to-date gain (15.3%) after today's slide was still large enough to keep the sector at the top of the 2014 leaderboard.
Treasuries spent the duration of the session in a steady retreat with the 10-yr note shedding nine ticks. As a result, the benchmark yield rose three basis points to 2.56%.
Participation remained on the light side with less than 675 million shares changing hands at the NYSE.
Economic data was limited to May Construction Spending and June ISM:
Construction spending increased 0.1% in May following an upwardly revised 0.8% (from 0.2%) gain in April. The consensus expected construction spending to increase 0.4%
Private construction spending fell 0.3% in May, giving back nearly all of the 0.3% increase from April
Total public construction spending increased 1.0% in May after increasing 2.1%
The ISM Manufacturing Index fell slightly to 55.3 in June from 55.4, while the consensus expected the Index to increase to 55.8
Considering that nearly all of the regional Federal Reserve manufacturing surveys showed an acceleration in manufacturing activity in June, the deceleration registered in the national ISM Index was disappointing and confusing
New orders managed to increase to 58.9 from 56.9
Order backlogs contracted, falling to 48.0 from 52.5
Production Index fell to 60.0 from 61.0
Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET, while Challenger Job Cuts for June will be announced at 7:30 ET. ADP Employment Change ( consensus 200K) for June will be announced at 8:15 ET, while May Factory Orders (consensus -0.4%) will cross the wires at 10:00 ET.

S&P 500 +6.8% YTD
Nasdaq Composite +6.8% YTD
Dow Jones Industrial Average +2.3% YTD
Russell 2000 +3.7% YTD

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