Day Traders Diary


The major averages posted solid gains ahead of tomorrow's policy directive from the Federal Open Market Committee. The S&P 500 rallied 0.8%, while the Russell 2000 (+0.3%) could not keep pace with the benchmark index.

Equity indices hovered near their flat lines during the first two hours of action, but surged in reaction to reports from the Wall Street Journal concerning tomorrow's FOMC statement. Specifically, Fed watcher Jon Hilsenrath indicated that the statement will once again reflect the Fed's intentions to keep the fed funds rate at the zero bound for a considerable time after quantitative easing is wound down. The report sent the market higher since it contrasted with recent speculation that the Fed would drop the 'considerable time' language from its guidance, thus implying a swifter rate hike.

Furthermore, the late-morning rally was assisted by reports indicating the People's Bank of China will provide CNY500 billion to its top five banks through a Short-term lending facility. This followed a disappointing Foreign Direct Investment report (-1.8%), which dropped to its lowest level in more than four years.

A central bank trifecta was completed after reports from Nikkei revealed that Japan's government plans to lower its economic assessment in the September report due on Friday. The news hinted at a potential move from the Bank of Japan and weighed on the yen.

All ten sectors finished in the green, but only three groups were able to settle ahead of the broader market. Health care (+1.4%) and utilities (+1.2%) were the top-performing countercyclical sectors, while energy (+1.2%) finished ahead of other growth-sensitive groups.

The health care sector padded its third-quarter gain to 5.6% with help from biotechnology as the iShares Nasdaq Biotechnology ETF (IBB 270.82, +4.73) rallied 1.8%.

For its part, the energy sector, which endured a rough start to the month, continued this week's outperformance. The sector extended its week-to-date gain to 1.9%, but remains down 3.4% so far in September. Crude oil factored into today's strength, rallying 2.0% to $94.91/bbl. The energy component received some support from a weaker dollar as the Dollar Index slipped 0.3%.

Meanwhile, most of the remaining cyclical groups could not keep up with the market. Interestingly, the technology sector (+0.7%) was among the early laggards, but ended just behind the S&P 500 thanks to a strong showing from chipmakers. The PHLX Semiconductor Index advanced 1.7% with Micron (MU 31.45, +1.43) pacing the rally amid Wall Street Journal reports indicating the company may introduce wearable devices. Also of note, shares of Apple (AAPL 100.86, -0.77) were down as much as 2.0% at the start, but narrowed their loss to 0.8% by the end of the day.

Treasuries spent the day in a steady retreat from their early morning highs. The 10-yr note ended flat with its yield at 2.59%.

Participation was ahead of recent averages with more than 630 million shares changing hands at the NYSE.

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET, while August CPI ( consensus 0.0%) and Q2 Current Account (expected deficit of $114.50 billion) will be reported at 8:30 ET. The NAHB Housing Market Index for September (consensus 56) will be released at 10:00 ET, while the latest policy statement from the FOMC will cross the wires at 14:00 ET.

Nasdaq Composite +9.0% YTD
S&P 500 +8.2% YTD
Dow Jones Industrial Average +3.4% YTD
Russell 2000 -0.9% YTD

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