Day Traders Diary


The stock market ended the Wednesday session on an upbeat note, but the key indices made the bulk of their move during the opening hour, while the intraday underperformance of small-cap stocks kept the market from overtaking its early high. The S&P 500 advanced 0.4%, while the Russell 2000 (-0.3%) slid below its 100-day moving average (1157.38), ending right below the 50-day moving average (1151.46).

The relative weakness among small caps was a continuation of a trend that has been in effect since the start of the month. Today's decline widened the July loss in the Russell 2000 to 3.5%, while the S&P 500 ended the session up 1.1% for the month.

Unlike small caps, the S&P 500 spent the entire session in the green, drawing strength from heavily-weighted sectors like energy (+1.6%), technology (+1.0%), and industrials (+0.5%).

Interestingly, the consumer discretionary sector (+0.3%) could not finish among the leaders even with Time Warner's (TWX 83.13, +12.12) 17.1% surge after rejecting an $80 billion ($85 per share) cash and stock buyout offer from 21st Century Fox (FOXA 33.00, -2.19).

Of the three leading groups, the tech sector opened in the lead with its top-weighted componentApple (AAPL 94.78, -0.54)providing support after announcing plans to develop business applications with IBM (IBM 192.36, +3.87). Shares of IBM rose 2.1%, settling near their early high, while Apple lost 0.6% after being up as much as 1.9% at the start.

Even though Apple surrendered its entire gain, the tech sector built on its early strength. Chipmakers picked up the slack with the PHLX Semiconductor Index rising 1.1% thanks to better than expected earnings from Intel (INTC 34.65, +2.94). The industry leader soared 9.3% after beating estimates, boosting its guidance, and adding $20 billion to its buyback program.

Staying on the earnings theme, Yahoo! (YHOO 33.79, -1.82) tumbled 5.1% after missing the Capital IQ consensus estimate by one cent on revenue that was also below estimates.

While the tech sector spent the session near its opening high, energy (+1.6%) took the lead during afternoon action. Similar to the sector, crude oil advanced steadily, climbing 1.3% to $101.18/bbl.

Also of note, the industrial sector finished among the leaders with support from transport stocks. The Dow Jones Transportation Average gained 0.6% with 16 of its 20 components ending in the green. Rail operator CSX (31.19, +0.04) tacked on 0.1% following its one-cent beat.

On the downside, the health care sector (-0.3%) was the weakest group as biotechnology weighed. The iShares Nasdaq Biotechnology ETF (IBB 248.52, -3.91) lost 1.6% on top of yesterday's 2.2% decline sparked by comments from Fed Chair Yellen who identified the group as one of the areas where valuations have been stretched.

Social media stocks were also mentioned in that group and the likes of Pandora Media (P 26.13, -0.47), Twitter (TWTR 37.43, -0.45), and Zynga (ZNGA 3.02, -0.08) lost between 1.4% and 2.6%.

Outside of health care, consumer staples (-0.1%) and financials (-0.1%) also finished in the red. In the financial sector, Bank of America (BAC 15.50, -0.31) reported above-consensus results, but its shares fell 2.0% as investors questioned the quality of the beat.

Treasuries saw losses in the early morning, but climbed into positive territory during the session. The 10-yr note added four ticks to send its yield lower by two basis points to 2.53%.

Participation was on the light side with 660 million shares changing hands at the NYSE.

Economic data included the MBA Mortgage Index, PPI, net long-term TIC flows, Industrial Production, and the NAHB Housing Market Index:
"The weekly MBA Mortgage Index fell 3.6% to follow last week's uptick of 1.9%
"Producer prices increased 0.4% in June after declining 0.2% in May, while the consensus expected an increase of 0.2% "A 2.1% surge in energy prices was the main catalyst for the strong increase in producer prices. That was the largest monthly increase in energy costs since February 2013. Gasoline prices increased 6.4% in June
"Food prices declined 0.2% for a second consecutive month

"Excluding food and energy, core prices were up 0.2% after declining 0.1% in May, while the consensus expected these prices to increase 0.2%
"The May net long-term TIC flows report showed a $19.40 billion inflow of foreign capital into U.S.-denominated assets to follow an outflow of $41.20 billion in the prior month
"Industrial production increased 0.2% in June after increasing a downwardly revised 0.5% (from 0.6%) in May, while the consensus expected an increase of 0.4% "Relatively strong manufacturing surveys did not translate into strong manufacturing production growth. Manufacturing production increased only 0.1%, down from a 0.4% gain in May and the slowest increase since production declined 1.0% in January
"Capacity utilization levels remained at 79.1% for the second consecutive month

"The July NAHB Housing Market Index rose to 53 from 49, while the consensus expected an uptick to 50
Tomorrow, weekly initial claims ( consensus 311K), June Housing Starts (consensus 1.02 million), and Building Permits (consensus 1.04 million) will be released at 8:30 ET, while the Philadelphia Fed survey (consensus 12.5) for July will be reported at 10:00 ET.
"S&P 500 +7.2% YTD
"Nasdaq Composite +6.0% YTD
"Dow Jones Industrial Average +3.4% YTD
"Russell 2000 -1.1% YTD

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