Day Traders Diary


Equity indices closed out the month of August on a modestly higher note. The Russell 2000 (+0.6%) and Nasdaq Composite (+0.5%) finished ahead of the S&P 500 (+0.3%), which extended its August gain to 3.8%. Blue chips lagged with the Dow Jones Industrial Average (+0.1%) spending the bulk of the session in the red.

The final week of August represented one of the quietest stretches for the stock market so far this year. The first four sessions of the week produced the four lowest volume days of the year (4-day average 487.3 million), but today's final tally of 604 million was a little closer to the 200-day average of 679 million.

The lack of activity during the week was a function of some participants being away on vacation, while many others opted to stick to the sidelines ahead of a three-day weekend in the U.S. that could feature new developments on the geopolitical front. However, the Friday tally benefited from month-end flows.

All ten sectors registered gains with heavily-weighted technology (+0.5%), health care (+0.4%), and financials (+0.5%) doing the bulk of the heavy lifting. The three sectors outperformed throughout the session, while the energy sector (+0.5%) joined the leaders during the late afternoon.

The tech sector rallied out of the gate with chipmakers setting the pace after Avago Technologies (AVGO 82.09, +5.73) delivered a solid quarterly report. Shares of AVGO soared 7.5%, while the PHLX Semiconductor Index gained 0.7% to end the month higher by 6.2%. The month-long strength contributed to the outperformance of the Nasdaq, which added 4.8% in August.

Furthermore, the tech-heavy index received another measure of support from biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 276.55, +2.43) gained 0.9% today to bring its August advance to 10.3%. Fittingly, the health care sector ended the month ahead of the other nine groups with a gain of 4.5%.

On the flip side, consumer discretionary (unch), consumer staples (+0.1%), and industrials (unch) lagged throughout the session. The industrial sector was the only group that was unable to finish the week in the green. The cyclical sector shed 0.3% for the week, but rallied 3.9% in August.

Treasuries held slim gains for the bulk of the session, but slid to lows into the close. The 10-yr yield climbed one basis point to 2.35%.

Economic data included personal income/spending data, Chicago PMI, and the Michigan Sentiment survey:

Personal income increased 0.2% in July following an upwardly revised 0.5% (from 0.4%) gain in June, while the consensus expected an increase of 0.3%
The increase in July income was in-line with the reported 0.2% increase in aggregate earnings from the previously released employment data
Personal spending fell 0.1% in July after increasing 0.4% in June, while the consensus expected an increase of 0.1%
Even though household debt ratios have normalized to pre-recession levels and consumer confidence levels have fully recovered, consumers are continuing to delay consumption growth in order to increase their savings
Core PCE prices increased 0.1% and are up 1.5% year-over-year, which is still well below the FOMC target rate
The Chicago PMI for August rose to 55.6 from 52.6, while the consensus expected an increase to 54.8
The University of Michigan Consumer Sentiment report for August was revised up to 82.5 from 79.2 in the final reading, while the consensus expected a revision to 80.0
Bond and equity markets will be closed on Monday for Labor Day. On Tuesday, the ISM Index for August and July Construction Spending will both be released at 10:00 ET.

Nasdaq Composite +9.7% YTD
S&P 500 +8.4% YTD
Dow Jones Industrial Average +3.2% YTD
Russell 2000 +0.8% YTD

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