Day Traders Diary


The stock market welcomed the new trading week with a mixed session that saw relative strength among large-cap stocks, while high-beta names underperformed. The Dow Jones Industrial Average (+0.3%) and S&P 500 (-0.1%) finished near their flat lines, while the Nasdaq Composite and Russell 2000 both lost 1.1%.

Equities began the day on a cautious note amid continued concerns regarding the strength of the global economy. Over the weekend, China reported its first decline in electricity production since 2009, while Industrial Production (6.9%; expected 8.8%) grew at its slowest pace since December 2008. Likewise, the Industrial Production report from the U.S. (-0.1%; consensus 0.3%) also left a bit to be desired.

In that same vein, participants have had to contend with cautious comments from the Organization for Economic Co-operation and Development (OECD), which lowered its 2014 GDP forecast for the U.S. (to 2.1% from 2.6%) and the Eurozone (to 0.8% from 1.2%).

Once the session got going, high-growth stocks weighed on the market and led to the underperformance of the Nasdaq Composite. Biotech names played a part with the iShares Nasdaq Biotechnology ETF (IBB 266.09, -3.48) sliding 1.3%. For its part, the top-weighted countercyclical sectorhealth care (-0.3%)finished among the laggards.

Elsewhere, the top-weighted cyclical sectortechnology (-0.6%)suffered from noteworthy losses among social media and chipmaker names. Twitter (TWTR 49.38, -2.73), Facebook (FB 74.58, -2.90), Weibo (WB 21.05, -2.76), LinkedIn (LNKD 207.71, -17.12), and Yelp (YELP 76.62, -5.16) tumbled between 3.7% and 11.6%. Chipmakers did not fare much better with the PHLX Semiconductor Index falling 1.2%. The sector-wide weakness masked the outperformance of Apple (AAPL 101.60, -0.06), which settled little changed after confirming record orders for the upcoming iPhone.

Also of note, the energy sector (+0.7%) rebounded after ending last week well behind other sectors. The growth-sensitive sector narrowed its September loss to 4.5% with help from Dow components Chevron (CVX 124.24, +1.58) and ExxonMobil (XOM 96.29, +0.51). The two added 1.3% and 0.5%, respectively, while crude oil rose 0.7% to $92.89/bbl.

Treasuries notched their highs shortly before the start of the session and spent the remainder of the day near those levels. The 10-yr note added six ticks with its yield slipping two basis points to 2.59%.

Participation remained on the light side with fewer than 600 million shares changing hands at the NYSE.

Economic data was limited to the Empire Manufacturing Survey and Industrial Production:

The Empire Manufacturing Survey for September registered a reading of 27.5, which was above the prior month's reading of 14.7
The consensus expected a reading of 16.0
The industrial production report for August certainly didn't go according to script as it showed production declining 0.1% versus the consensus estimate, which called for a 0.3% increase
A 7.6% decline in the production of motor vehicle and parts was the big drag on total industrial production for the month. That contributed to a 4.4% drop in the output of durable consumer goods and led to a 0.4% decline in manufacturing production
The production data for July was revised down to show a 0.2% increase versus an originally reported 0.4% increase
Capacity utilization slumped to 78.8%, which was also below the consensus estimate of 79.3% and below a downwardly revised 79.1% (from 79.2%) reading for July
Tomorrow, The Producer Price Index ( consensus 0.0%) will be released at 8:30 ET, while Net Long-Term TIC Flows will be reported at 16:00 ET.

Nasdaq Composite +8.2% YTD
S&P 500 +7.4% YTD
Dow Jones Industrial Average +2.7% YTD
Russell 2000 -1.4% YTD

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