Day Traders Diary


The stock market ended the midweek session on an upbeat note despite enduring a shaky start to the day. The S&P 500 rose 0.8% with nine sectors posting gains, while the Nasdaq Composite (+1.0%) outperformed.

Equity indices spent the initial 90 minutes of action near their flat lines with the S&P 500 briefly pressured to its 50-day moving average (1976.58) by the early weakness in the energy sector (+0.04%). The growth-sensitive group was down in excess of 1.0% in the early going, but charged into positive territory during afternoon action. Crude oil went along for the afternoon ride, climbing 1.6% to $93.03/bbl.

The test of the 50-day moving average invited dip buyers into the fold, while the relative strength of high-beta areas like biotechnology and chipmakers emboldened their efforts. Furthermore, a well-timed report from the Wall Street Journal indicating China may replace the People's Bank of China Governor Zhou with someone more dovish provided an added measure of support.

The health care sector (+1.7%) seized the lead at the start and held its ground throughout the day to pad its September advance to 2.4%. Biotechnology fueled the rally with the iShares Nasdaq Biotechnology ETF (IBB 279.29, +7.67) climbing 2.8% to a fresh record high.

Conversely, the surge in biotech gave a boost to the Nasdaq, which ended ahead of the broader market even as the top-weighted index componentApple (AAPL 101.73, -0.91)spent the day in the red. Chipmakers picked up some of the slack with the PHLX Semiconductor Index climbing 1.2%. Micron (MU 32.22, +1.02) was a notable outperformer amid reports the company has discussed a potential joint venture with Advanced Semiconductor (ASX 6.02, 0.00).

Elsewhere, the consumer discretionary sector (+1.0%) finished among the leaders despite underperforming early. However, homebuilders were unable to participate following a disappointing quarterly report from KB Home (KBH 16.07, -0.90). The stock lost 5.3% and pressured its peers in the early going, but the group was able to trim its losses after a better than expected New Home Sales report crossed the wires (504K; consensus 435K). The iShares Dow Jones US Home Construction ETF (ITB 23.15, -0.05) settled lower by 0.2%.

Treasuries attempted to turn positive just ahead of the housing data, but were rebuffed. The 10-yr note spent the entire day in the red, ending near the lows with its yield up four basis points at 2.56%.

Today's session was met with above-average participation with more than 730 million shares changing hands at the NYSE.

Economic data included New Home Sales and the MBA Mortgage Index:

New home sales jumped 18.0% in August to 504,000 from an upwardly revised 427,000 (from 412,000), while the consensus expected an increase to 435,000
That was the first time that new home sales surpassed 500,000 since May 2008, and the increase was in-line with the spike in the September NAHB home builder index, which reached its highest point since November 2005
With the exception of the Midwest region, which was flat, sales growth was extremely strong across the U.S. That included a 50.0% increase in sales in the West and a 29.2% increase in the Northeast.
The weekly MBA Mortgage Index fell 4.1% to follow last week's 7.9% spike
Tomorrow, weekly Initial Claims ( consensus 300K) and Durable Orders for August (consensus -16.3%) will be released at 8:30 ET.

Nasdaq Composite +9.1% YTD
S&P 500 +8.1% YTD
Dow Jones Industrial Average +3.8% YTD
Russell 2000 -3.2% YTD

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