Day Traders Diary
11/21/14The major averages ended an upbeat week with modest gains despite pulling back from their early highs. The S&P 500 gained 0.5% while the Nasdaq Composite (+0.2%) underperformed.
The stock marketand specifically equity futuresdonned their party hats in the early morning hours after two major central banks spiked the punchbowl. Most notably, the People's Bank of China announced its first rate cut in two years, lowering its deposit rate 25 basis points to 2.75% and trimming its one-year lending rate 40 basis points to 5.60%. The news boosted U.S. futures and European equities, while comments made by European Central Bank President Mario Draghi also contributed to increased risk tolerance.
Mr. Draghi served up another reminder that low eurozone inflation has become increasingly challenging and the central bank is ready to act fast if current trends continue. The euro (1.2390) responded by returning near its early November low, while the resulting greenback strength sent the Dollar Index (88.29, +0.70) to a fresh four-year high.
The Dollar Index finished near its best level of the day while equities endured a bit of a hangover following the early morning extravaganza. Despite the pullback, all ten sectors ended in the green with telecom services (+0.1%) bringing up the rear.
Cyclical sectors fared better than their defensively-oriented counterparts with commodity-linked groups posting solid gains. The strength in these areas could be traced back to the news of the rate cut in China that underpinned miners and steelmakers. Rio Tinto (RIO 47.51, +2.20) surged 4.9% while the broader materials sector (+1.3%) settled in the lead. As for steelmakers, the Market Vectors Steel ETF (SLX 41.08, +1.54) soared 3.9%.
Manufacturers of heavy machinery also rallied with Caterpillar (CAT 106.45, +4.36) jumping 4.3%. The Dow component gave a boost to the industrial sector (+1.0%), which ended among the leaders.
Also of note, the energy sector (+1.2%) rallied with help from crude oil, which rose 1.1% to $76.53/bbl. However, crude ended well below its early high in the neighborhood of $77.75/bbl.
Elsewhere, the consumer discretionary sector (+0.2%) could not hold its early gain amid weakness in select retailers. GameStop (GME 37.86, -5.67) fell 13.0% after missing earnings/revenue expectations and guiding lower while Gap (GPS 38.46, -1.68) lost 4.2% after reporting in-line with its warning from November 6 and lowering its earnings guidance for fiscal year 2015. High-beta sector components also lagged with Expedia (EXPE 84.69, -1.39) and Netflix (NFLX 360.28, -7.86) ending lower by 1.6% and 2.1%, respectively.
Similarly, technology (+0.2%) could only hold a slim portion of its opening advance with Apple (AAPL 116.35, +0.04), Intel (INTC 35.60, -0.35), and Microsoft (MSFT 47.96, -0.73) pressuring the top-weighted sector from its early high.
Interestingly, Treasuries spent the day in a steady advance from their morning lows. The 10-yr note ended at its best level of the day with the benchmark yield down three basis points at 2.31%.
Today's participation was ahead of recent averages with roughly a billion shares changing hands at the NYSE floor.
Monday's session will be free of notable economic data.
"Nasdaq Composite +12.8% YTD
"S&P 500 +11.6% YTD
"Dow Jones Industrial Average +7.4% YTD
"Russell 2000 +0.7% YTD
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