Day Traders Diary


The stock market had difficulty getting anything going on Wednesday as a wait-and-see stance permeated the trading action. That was understandable given some confusing headlines about cease-fire talk between Ukraine and Russia, Apple (AAPL 98.94, -4.36) suffering a 4.2% decline in its stock price, and the specter of policy meetings by the Bank of Japan, the Bank of England, and the ECB on Thursday.

The way things ended on Wednesday was pretty much how they went throughout the day. That is, the Dow (+0.1%) and S&P 500 (-0.1%) held up better than the Nasdaq Composite (-0.6%) and Russell 2000 (-0.6%).

Things sounded more promising before the open when there was talk of a "permanent" cease-fire agreement between Ukraine and Russia. That report, however, got shot down (no pun intended) by the Kremlin, which shrewdly countered that it could not have agreed to such a thing when it is not a party to the conflict in eastern Ukraine.

Ukraine itself subsequently clarified that there was a mutual understanding as to the steps that need to be taken to contribute to the establishment peace. In other words, no one is sticking daisies in their gun barrels just yet.

That clarification helped dampen the bullish enthusiasm seen in the overnight trade and it enabled the Treasury market to bounce back from early losses. Nonetheless, the major indices did start the day on an upbeat note.

The S&P 500 established a new intraday high at 2009.35... and then it ran into a wall of resistance when Apple rolled over in a profit-taking spree catalyzed by the analyst at Pacific Crest Securities who suggested taking some profits ahead of the company's new product announcements on September 9. It is worth noting, too, that rival Samsung unveiled its latest smartphones today, highlighting for all to see that the competitive landscape in the industry is sure to remain challenging.

Apple's losses weighed heavily on the information technology sector (-0.7%), which in turn weighed on the broader market.

Things could have been worse if not for the relative strength exhibited by the health care (+0.3%) and energy (+0.3%) sectors. The former garnered support from large-cap pharmaceuticals like Merck (MRK 60.48, +0.69), Abbott Labs (ABT 42.76, +0.53), and Eli Lilly (LLY 64.15, +0.47), while the latter sector rebounded on the back of crude oil prices.

Crude futures, which fell 3.2% on Tuesday, bounced 2.6% on Wednesday to $95.33, aided by some weakness in the dollar.

The best-performing sector on Wednesday was the utilities sector (+0.6%), which drafted off the comeback waged by longer-dated Treasuries. At one point, the yield on the 10-yr note hit 2.46%, but it started to come back down after Russia basically said "nyet" to the cease-fire news, and as the stock market failed to sustain its opening rally effort. The 10-yr note settled the day up six ticks with its yield at 2.40%.

The debt markets promise to be a hotbed of activity on Thursday as participants digest the latest policy pronouncements out of Japan, England, and the ECB. The ECB is getting top billing ahead of time as the market is anxious to hear if any additional stimulus will be provided.

Thursday will also produce a raft of economic data that includes the ADP Employment Change, initial Claims, Trade Balance, Q2 Productivity, and ISM Services reports.

Today's data didn't sway things one way or another.

Factory orders rose 10.5% in July, which was slightly below the consensus estimate of 11.0%, yet any disappointment was tempered by the upward revision for June to 1.5% from 1.1%. Auto sales, meanwhile, hit an annual run rate of 17.5 million units in August. That was the best August in eight years, yet there were some rumblings about sales being driven by increased discounts and aggressive financing offers.

In any case, both Ford (F 17.47, -0.13) and General Motors (GM 34.47, -0.33) traded down in the wake of the August sales reports

Separately, homebuilder Toll Brothers (TOL 33.95, -1.68) had a tough day following its latest earnings report, and so did Delta (DAL 38.82, -2.11), which cut its passenger unit revenue guidance for the third quarter to 2-3% from 2-4%. With the central bank meetings on Thursday, corporate headlines are expected to take a backseat once again as a market driver.
Dow +3.1% YTD
Nasdaq Composite +9.5% YTD
S&P 500 +8.2% YTD
Russell 2000 +0.7% YTD

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