Day Traders Diary


The stock market rallied on Tuesday with the S&P 500 climbing 1.2%. Small cap names had an even better showing, sending the Russell 2000 higher by 2.9%.

Equity indices climbed steadily throughout the day with the S&P 500 turning positive for the month of October. The index ended the day with an October gain of 0.6% after being down as much as 5.6% for the month on October 15.

In large part, the sharp rebound off the mid-October low was predicated on the belief that the Federal Reserve will not rush to hike the fed funds rate after asset purchases under the Quantitative Easing program end. To that point, the Federal Open Market Committee is expected to announce its final $15 billion taper tomorrow while the accompanying policy statement will be scrutinized for clues concerning the expected rate path.

All ten sectors finished in the green with yesterday's laggardenergy (+2.3%)ending in the lead. The sector enjoyed a relief rally with support from BP (BP 42.84, +0.89) after the industry giant reported a bottom-line beat. A modest 0.4% uptick in the price of crude ($81.37/bbl) also factored into the strength, while disappointing earnings from Consol Energy (CNX 35.59, +1.36) and Noble Energy (NBL 58.36, +1.98) did not prevent a sector-wide rally.

Similar to energy, the industrial sector (+1.7%) displayed relative strength throughout the session. Transports and defense stocks underpinned the sector as evidenced by the Dow Jones Transportation Average (+1.5%) and PHLX Defense Index (+1.8%).

Meanwhile, most of the remaining cyclical groups kept pace with the benchmark index while the materials sector (+0.9%) lagged. Elsewhere, the discretionary space (+1.1%) ended just behind the market with solid gains among restaurant stocks masking the weakness in apparel names after Kohl's (KSS 54.66, -3.89) lowered its guidance. The stock fell 6.6% while Coach (COH 34.00, -2.15) lost 6.0% after its bottom-line beat was not enough to signal a turnaround.

In other earnings of note, Twitter (TWTR 43.78, -4.78) slumped 9.8% after worse than expected monthly active user figures overshadowed in-line results. For its part, Twitter's peer, Facebook (FB 80.77, +0.49), ended flat ahead of its quarterly report.

Also of note, countercyclical sectors lagged across the board after showing relative strength yesterday. The telecom services sector (+1.0%) had the best showing while consumer staples (+0.4%), health care (+0.7%), and utilities (+0.7%) struggled to keep up.

Treasuries slumped in the morning and finished near their session lows. The 10-yr yield rose three basis points to 2.29%.

Participation was in-line with recent averages as 779 million shares changed hands at the NYSE floor.

Economic data included Durable Orders, Case-Shiller 20-City Index, and Consumer Confidence:

September durable goods orders fell 1.3%, which was worse than the 0.6% increase expected among economists polled by
The drop followed the prior month's revised decline of 18.3% (from -18.4%) and was accented with a 2.8% decline in machinery orders, a 2.5% decline in computer and electronic product orders, and a 3.7% drop in orders for transportation equipment
Excluding transportation, durable orders decreased 0.2% (consensus 0.5%) to follow the prior month's revised increase of 0.7% (from 0.4%)
The Case-Shiller 20-city Home Price Index for August rose 5.6%, while a 5.5% increase had been expected by the consensus
This followed the previous month's increase of 6.7%
The Conference Board's Consumer Confidence Index jumped to 94.5 in October from an upwardly revised 89.0 (from 86.0), while the consensus expected a reading of 87.2
Consumer confidence is now at its strongest point since October 2007 and has finally recovered from the Great Recession
Confidence generally trends in conjunction with the equity market, unemployment rate, gasoline prices, and media reports. Large swings in equity prices along with dire media reports about Ebola were expected to contain positive excitement from an improving labor market and lower gasoline costs
Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while the FOMC policy directive will cross the wires at 14:00 ET.

Nasdaq Composite +9.3% YTD
S&P 500 +7.4% YTD
Dow Jones Industrial Average +2.6% YTD
Russell 2000 -1.1% YTD

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