Day Traders Diary


The stock market endured a broad-based retreat on Thursday that pressured the Nasdaq (-1.9%) and the S&P 500 (-1.6%) below their 50-day moving averages, while the Dow (-1.5%) notched a session low just above that mark. All ten sectors were encompassed in the slide with eight groups posting losses of 1.0% or more.

Equities began the day with modest losses and continued heading lower through the first 90 minutes of the session. Interestingly, dip-buyers showed very little interest in getting involved, which resulted in new session lows during the afternoon.

The reluctance to step into the fold was driven in part by the lack of notable leadership. To that point, all six cyclical sectors ended in-line or behind the S&P 500 with high-beta areas like biotechnology and chipmakers finishing among the laggards. The iShares Nasdaq Biotechnology ETF (IBB 273.97, -5.32) and the PHLX Semiconductor Index both lost 1.9%.

Both industry groups contributed to the underperformance of the Nasdaq, which also had to contend with significant weakness in its top-weighted component. Shares of Apple (AAPL 97.87, -3.88) tumbled 3.8% to end below the 50-day moving average for the first time since April 23. As for the technology sector (-2.3%), the group spent the day at the bottom of the leaderboard.

Meanwhile, the remaining cyclical sectors did not fare much better. The energy space (-1.5%) displayed relative strength in the early going, but fell in line with the market as the session wore on. The growth-sensitive sector widened its September decline to 7.1%.

The wide-ranging slide did not spare typical areas of relative strength like blue chip names and utility stocks. All 30 Dow components settled in the red with just three index members posting losses slimmer than 1.0%. As for utilities, the sector fell 0.6% despite a retreat in Treasury yields. The 10-yr note climbed throughout the session for a half-point gain to lower the benchmark yield six basis points to 2.51%.

Also of note, the Dollar Index (85.23, +0.19) pulled back from its morning high, but remained at its best level since 2010. The greenback retreated from highs amid intraday strength in the Japanese yen and the British pound. The yen rallied from its overnight low of 109.39 to 108.70 against the dollar, while the pound spiked off its low after Bank of England Governor Mark Carney said the first rate hike from the BoE has gotten closer.

The daylong weakness caused participants to increase their demand for volatility protection, sending the CBOE Volatility Index (VIX 15.95, +2.68) to its highest level since early August.

Participation was above average with nearly 720 million shares changing hands at the NYSE.

Economic data included Initial Claims and Durable Orders:

The initial claims level increased by 12,000 to 293,000 from an upwardly revised 281,000 (from 280,000), while the consensus expected an increase to 300,000
Once again, the Department of Labor reported that there were no special factors impacting the claims level, which implies labor market conditions are at, or very near, full employment
Durable goods orders fell 18.2% in August after increasing a slightly downwardly revised 22.5% (from 22.6%) in July, while the consensus expected a decline of 16.3%
A surge in aircraft orders in July resulted in the largest monthly increase in overall durable goods last month. The normal payback period came immediately and resulted in the largest monthly decline in overall orders in August
Tomorrow, the third estimate of Q3 GDP will be released at 8:30 ET ( consensus 4.6%), while the final reading of the Michigan Sentiment index for September will cross the wires at 9:55 ET (consensus 85.0).

Nasdaq Composite +7.0% YTD
S&P 500 +6.4% YTD
Dow Jones Industrial Average +2.2% YTD

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