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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Day Traders Diary

8/25/14

The stock market began the last week of August on an upbeat note with the S&P 500 making its first appearance above the 2,000 level. The benchmark index added 0.5% with all ten sectors ending in the green, while the Russell 2000 (+0.5%) finished in-line despite showing relative strength at the start.

Equity indices rallied out of the gate, but the opening push ran out of steam after the S&P 500 notched a session high at 2,001.95. The benchmark index took a couple steps back after reaching that level and held its ground throughout the afternoon.

M&A activity in the health care sector (+0.7%) contributed to the opening rally after Swiss drug maker Roche (RHHBY 36.57, +0.25) agreed to acquire InterMune (ITMN 72.85, +19.05) for $74.00 per share, representing a 38.0% premium to Friday's closing price. Shares of ITMN surged 35.4%, which helped lift the iShares Nasdaq Biotechnology ETF (IBB 272.63, +6.20) to its best level since late February. The biotech ETF extended its August gain to 8.7%, settling within three points of its all-time high (275.40) that was notched on February 25.

The relative strength of biotechnology underpinned the Nasdaq Composite (+0.4%), but the index could not keep pace with the S&P 500 amid relative weakness in the technology sector (unch). Large cap components were mixed with Apple (AAPL 101.54, +0.22) and IBM (IBM 191.16, +0.75) posting modest gains, while Google (GOOGL 590.57, -1.97) and Intel (INTC 34.81, -0.13) struggled. Furthermore, high-beta chipmakers weighed as evidenced by a 0.4% decline in the PHLX Semiconductor Index.

Similar to the tech sector, three other cyclical groups could not keep up with the broader market, while energy (+0.8%) and financials (+0.8%) outperformed.

The financial sector finished in the lead with Goldman Sachs (GS 177.87, +2.40) climbing 1.4% after reaching a settlement with the Federal Housing Finance Agency over claims with respect to mortgage-backed securities.

Also of note, the consumer discretionary space (+0.3%) underperformed with homebuilders showing relative weakness following today's disappointing New Home Sales report. The iShares Dow Jones US Home Construction ETF (ITB 23.97, -0.12) lost 0.5%. However, quick-service restaurants rallied after Burger King (BKW 32.40, +5.29) confirmed it has entered into merger discussions with Tim Hortons (THI 74.72, +11.88).

Treasuries finished the day with modest gains after spending the day in positive territory. The 10-yr yield slipped two basis points to 2.39%.

Despite the advance, there wasn't much conviction in the rally as only 482 million shares changed hands at the NYSE floor. This represented the lowest total of the year.

Economic data was limited to the New Home Sales report for July, which declined 2.4% to 412,000 from an upwardly revised 422,000 (from 406,000), while the Briefing.com consensus expected an increase to 427,000. While sales were a disappointment, demand in July remained in-line with recent trends even after taking into account the June revision. Since January, the 12-month moving average has averaged 426,000 and the drop in July sales brought the moving average to exactly 426,000.

Tomorrow, Durable Orders for July (Briefing.com consensus 7.0%) will be released at 8:30 ET, while June Case-Shiller 20-city Index (consensus 8.3%) and the FHFA Housing Price Index for June will both be reported at 9:00 ET. The day's data will be topped off with the Consumer Confidence report for August, which will be released at 10:00 ET (expected 88.3).
Nasdaq Composite +9.1% YTD
S&P 500 +8.1% YTD
Dow Jones Industrial Average +3.0% YTD
Russell 2000 +0.2% YTD All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.