Day Traders Diary


The major averages endured another whipsaw session that ended with a flat finish for the S&P 500 while the Russell 2000 (+1.1%) registered its second consecutive advance. The price-weighted Dow was the weakest performer of the day with a loss of 0.2%.

Equity indices tumbled out of the gate for the second day in a row amid broad-based selling pressure that also weighed on equities in Europe. The S&P 500 marked a session low near the 1,835 level during the first hour, but spiked more than 20 points following comments from St. Louis Fed President James Bullard. Mr. Bullard appeared on Bloomberg TV and said the Fed should consider delaying the end of its Quantitative Easing program, which is set to wind down at the October FOMC meeting.

The market jumped from lows in reaction to the comments, but it is worth noting that Mr. Bullard is not a voting FOMC member this year and only an alternate voter on next year's schedule. The non-voter status did not get in the way of a surge in equities while Minneapolis Fed President (and FOMC voter) Kocherlakota provided a similar view, saying there is more the Fed can do to achieve maximum employment.

The intraday rebound was paced by some of the groups that faced the most aggressive selling in recent days. The energy sector (+1.7%) led the way, trimming its October loss to 9.0%. Crude oil also rallied, climbing 1.0% to $82.61/bbl after recovering from its overnight low near $79.91/bbl. Meanwhile, the other commodity-linked group-materials (+1.0%)-followed not far behind.

Elsewhere, the industrial sector (+0.7%) advanced with help from transport stocks. Delta Air Lines (DAL 33.32, +0.94) jumped 2.9% after beating earnings estimates while the Dow Jones Transportation Average (+1.1%) extended this week's gain to 1.7%.

The three growth-sensitive sectors spent the entire afternoon in the green while other cyclical groups were a bit more reluctant in joining the rebound. Financials settled in-line with the S&P 500, but the sector was weighed down by Goldman Sachs (GS 172.58, -4.66), which fell 2.6% despite reporting better than expected earnings.

Also of note, the discretionary space (+0.2%) was underpinned by major apparel names like Nike (NKE 87.04, +1.86) and V F Corp (VFC 63.98, +1.18) with their strength masking a 19.4% plunge in the shares of Netflix (NFLX 361.70, -86.89). The video streaming service surpassed its earnings estimates, but guided Q4 results below consensus and said its recent price hike has resulted in slower user growth.

On the downside, the technology sector lost 0.6% even as chipmakers rallied broadly, sending the PHLX Semiconductor Index higher by 1.5%. Large cap listings kept the sector in the red with Apple (AAPL 96.26, -1.28) falling 1.3% after refreshing its product lineup during an afternoon press event. Similarly, Google (GOOGL 536.53, -4.20) lost 0.8% ahead of its quarterly report.

Treasuries ended on their lows after a steady slide from early morning highs. The 10-yr yield ticked up two basis points to 2.16%, which represented an 18-bps spike from the low.

Strong participation continued with more than a billion shares changing hands at the NYSE floor.

Economic data included Initial Claims, Industrial Production, Philadelphia Fed Survey, and the NAHB Housing Market Index:

The weekly initial claims level fell to 264,000 from an unrevised 287,000, while the consensus expected an increase to 290,000
The Department of Labor said there were no special factors influencing the report

Industrial production increased 1.0% in September after falling a downwardly revised 0.2% (from -0.1%) while the consensus expected an increase of 0.4%

Manufacturing production did a full 180 degree turnaround. After falling 0.5% in August, production rose 0.5% in September. That gain was in-line with the improvements in the Federal Reserve regional manufacturing surveys and the national ISM production index

The Philadelphia Fed's Business Outlook Survey Dipped to 20.7 in October from 22.5, while the consensus expected a decline to 19.8
Production levels softened as the Shipments Index fell to 16.6 from 21.6 in September

Employment conditions worsened with the Number of

Employees Index falling to 12.1 from 21.2

The NAHB Housing Market Index for October fell to 54 from 59, while the consensus expected the reading to hold at 59

Tomorrow, September Housing Starts ( consensus 1013K) and Building Permits (consensus 1030K) will be released at 8:30 ET while the preliminary reading of the Michigan Sentiment survey for October (expected 84.0) will cross the wires at 9:55 ET.

Nasdaq Composite +1.0% YTD
S&P 500 +0.8% YTD
Dow Jones Industrial Average -2.8% YTD
Russell 2000 -6.8% YTD

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