Day Traders Diary


The stock market began the new week on a cautious note. The S&P 500 lost 0.3%, but managed to erase more than half of its opening decline. Thanks to the rebound, the benchmark index reclaimed its 50-day moving average (1976.78) after slipping below that level in the morning.

Equities slumped at the open amid a couple global developments that dampened the overall risk appetite. Continued student protests in Hong Kong and a potential response from China weighed on the Hang Seng index (-1.9%), while other regional indices held up relatively well with Japan's Nikkei (+0.5%) and the Shanghai Composite (+0.4%) posting gains.

Meanwhile in Europe, participants showed concerns about the Catalan independence referendum scheduled to take place on November 9. Over the weekend, the regional government outlined an official referendum plan despite pushback from national leaders. Spanish debt sold off on the developments with the 10-yr yield climbing four basis points to 2.22%. Another twist was introduced to the story during the afternoon when the Spanish Constitutional Court announced it will block the independence vote.

The overseas developments contributed to a lower start, but the key indices wasted little time in staging a rebound. The S&P 500 narrowed its loss to just five points during the initial 90 minutes of action and held its ground until the close.

In large part, the technology sector (-0.1%) was responsible for the rebound with chipmakers displaying relative strength. Intel (INTC 34.90, +0.64) surged 1.9% after announcing a partnership with Mitsubishi Electric to create next generation factory automation systems, while the PHLX Semiconductor Index climbed 0.1%.

Outside of Intel, most large cap sector components struggled to keep pace with the broader market. Facebook (FB 79.00, +0.21) and Microsoft (MSFT 46.44, +0.03) settled just above their flat lines, while Apple (AAPL 100.11, -0.64), Qualcomm (QCOM 74.82, -0.24), and Oracle (ORCL 38.44, -0.51) lagged.

The technology sector was the only group able to overtake the broader market, while the remaining five cyclical sectors ended behind the S&P 500. Notably, the energy space (-0.4%) widened its September loss to 6.5% and extended its Q3 decline to 8.0%.

Elsewhere, the consumer discretionary sector (-0.6%) lagged amid weakness in carmakers after Ford (F 15.11, -1.22) said it projects a pre-tax loss of $250 million for its European unit in 2015. The stock plunged 7.5%, while peer General Motors (GM 32.22, -0.95) lost 2.9%. Homebuilders also lagged despite lower Treasury yields. The iShares Dow Jones US Home Construction ETF (ITB 22.77, -0.16) lost 0.7%.

Although things were relatively quiet on the corporate front, M&A activity made some headlines. On that note, TIBCO Software (TIBX 23.65, +4.14) surged 21.2% after agreeing to be acquired by Vista Equity Partners for $24.00 per share, representing a 26.3% premium to the closing price on September 23. Separately, Athlon Energy (ATHL 58.32, +11.59) spiked 24.8% in reaction to news that Encana (ECA 21.59, +0.46) will acquire all of the issued and outstanding shares of ATHL for $58.50/share. Lastly, DreamWorks Animation (DWA 28.18, +5.82) jumped 26.0% amid speculation the company could be acquired by Softbank (SFTBY 35.24, -1.14).

Treasuries ended near their highs with the 10-yr yield falling six basis points to 2.48%.

Participation was below average with fewer than 640 million shares changing hands at the NYSE floor.

Economic data was limited to Personal Income/Spending and Pending Home Sales for August:

Personal income increased 0.3% in August, up from an unrevised 0.2% increase in July, while the consensus expected an increase of 0.3%
The August employment report showed a 0.4% increase in aggregate earnings, which matched the 0.4% increase in wages and salaries
Personal spending levels increased 0.5% in August after no change in spending (from -0.1%) in July, while the consensus expected an increase 0.4%
Big gains in motor vehicle sales were a primary catalyst for a 0.4% increase in goods spending
Services spending rose 0.5% after reporting no change in July
Core PCE prices rose 0.1%, while the consensus expected an unchanged reading
Pending home sales for August fell 1.0%, which was worse than the 0.2% decrease forecast by the consensus o The July reading was revised down to 3.2% from 3.3%
Tomorrow, the Case-Shiller 20-city Index for July ( consensus 7.4%) will be released at 9:00 ET, while the Chicago PMI for September (consensus 61.5) will cross the wires at 9:45 ET. The day's data will be topped off with the 10:00 ET release of the Consumer Confidence report for September (expected 92.0).

Nasdaq Composite +7.9% YTD
S&P 500 +7.0% YTD
Dow Jones Industrial Average +3.0% YTD
Russell 2000 -3.9% YTD

All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.