Day Traders Diary


The major averages posted modest Tuesday losses after being unable to hold their opening gains. Small caps displayed relative weakness throughout the session, which resulted in the Nasdaq Composite (-0.5%) and Russell 2000 (-1.0%) ending behind the S&P 500 (-0.2%) and the Dow Jones Industrial Average (+0.03%).
Equities appeared to be on track for an upbeat session after the financial sector (+0.7%) got out to an early lead thanks to better than expected earnings from Goldman Sachs (GS 169.17, +2.17) and JPMorgan Chase (JPM 58.27, +1.98). The two influential sector components gained 1.3% and 3.5%, respectively, but their strength was not enough to keep the benchmark index out of the red.
The S&P 500 slumped to lows in the late morning after supplemental remarks to Fed Chair Yellen's semiannual testimony on monetary policy singled out biotechnology and social media stocks as groups that have had their valuations stretched. Appropriately, stocks from both arenas responded by pacing the late-morning retreat.
Most notably, the iShares Nasdaq Biotechnology ETF (IBB 252.43, -5.67) lost 2.2%, which put the ETF back near its lowest levels of the month. For its part, the health care sector (-0.9%) was the weakest performing group.
Meanwhile, another countercyclical sectorconsumer staplesalso ended near the bottom of the leaderboard. The sector lost 0.8% with tobacco names exerting pressure as Lorillard (LO 60.17, -7.05) tumbled 10.5% after agreeing to be acquired by Reynolds American (RAI 58.84, -4.34) for $68.88 per share. The deal announcement was followed by news that Moody's is reviewing ratings of both names for potential downgrades.
Outside of consumer staples and health care, the other two countercyclical sectors fared well. The telecom services sector rose 0.7% and utilities added 0.5%.
Turning back to the cyclical side, financials remained in the green throughout the day, while the industrial sector (+0.1%) crept into positive territory during the afternoon. Transports contributed to the rebound (Dow Jones Transportation Average +0.4%) with JB Hunt (JBHT 76.94, +2.65) leading the pack. The stock rallied 3.6% after reporting in-line results this morning.
Elsewhere, the top-weighted S&P 500 sectortechnology (-0.2%)underperformed intraday, but caught up to the S&P 500 ahead of the close. Social media names lagged, but were able to trim some of their losses. Facebook (FB 67.16, -0.73), Twitter (TWTR 37.88, -0.43), and Yelp (YELP 69.02, -2.09) lost between 1.1% and 2.9%.
Treasuries ended the day little changed after alternating between gains and losses. The 10-yr yield finished the day at 2.55%.
Participation bucked the recent trend with an above-average 716 million shares changing hands at the NYSE.
Economic data included June Retail Sales, June import/export prices, July Empire Manufacturing survey, and the Empire Manufacturing Survey:
Retail sales increased 0.2% in June following an upwardly revised 0.5% (from 0.3%) increase in May, while the consensus expected an increase of 0.7%
The June employment report signaled a strong increase in aggregate earnings and motor vehicle sales for the same month exceeded 17 million SAAR for the first time since July 2006. Both of those factors were expected to drive retail sales growth in June, yet failed to provide the oomph needed to accelerate consumer demand
It seems likely that consumers pocketed some of the extra earnings in June and increased their savings rate
Excluding motor vehicles, retail sales increased a 0.4% in June, which was the same growth rate following an upward revision (from 0.1%) in May. The consensus expected these sales to increase 0.6%
Export prices, excluding agriculture, fell 0.3% in June after increasing 0.1% in the prior reading
Excluding oil, import prices declined 0.1%, which followed last month's unchanged reading
The Empire Manufacturing Survey for July registered a reading of 25.6, which was well ahead of the prior month's reading of 19.3. It was also ahead of the consensus estimate, which was pegged at 13.2
Business inventories increased 0.5% in May following an unrevised 0.6% increase in April, while the consensus expected business inventories to increase 0.6%
Inventories for manufacturers (0.8%) and merchant wholesalers (0.5%) were known prior to the release. Only retailer inventories, which increased 0.2% in May after increasing 0.5% in April, were unknown
Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET, while June PPI ( consensus 0.2%) will be reported at 8:30 ET. The Net Long-Term TIC Flows report for May will cross the wires at 9:00 ET, while June Industrial Production (consensus 0.4%) and Capacity Utilization (expected 79.2%) will both be announced at 9:15 ET. The busy day of data will also include the 10:00 ET release of the NAHB Housing Market Index for July (consensus 50) and the July Fed Beige Book, which will be released at 14:00 ET.

S&P 500 +6.8% YTD
Nasdaq Composite +5.7% YTD
Dow Jones Industrial Average +2.9% YTD
Russell 2000 -0.8% YTD

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