Day Traders Diary


The stock market enjoyed a broad rebound on Tuesday after starting the week with a Monday retreat. The S&P 500 settled higher by 0.6% while the Russell 2000 (+1.2%) displayed relative strength. Despite today's outperformance, the small-cap index could only narrow its weekly decline to 0.4% while the S&P 500 reclaimed most of its loss from Monday.

The benchmark index spent the day in a steady advance with M&A news from this morning acting as a supportive factor. In the technology sector (+0.3%), Cypress Semiconductor (CY 11.92, +1.48) agreed to a $4 billion merger of equals with Spansion (CODE 27.86, +5.01) while health care component (+1.1%) Avanir Pharmaceuticals (AVNR 16.92, +1.92) agreed to be acquired by Otsuka Pharmaceuticals for $3.5 billion in cash. Also of note, insurer Aviva (AV 15.64, -0.09) announced its acquisition of Friends Life Group.

Outside of corporate deals, the Tuesday session was very quiet, but somewhat surprisingly, trading volume surpassed recent averages with 795 million shares changing hands at the NYSE.

Nine of ten sectors were able to register gains with energy (+1.3%) ending in the lead for the second day in a row. The sector spent the bulk of the session ahead of other groups even as crude oil fell 3.0% to $66.97/bbl. Dow components Chevron (CVX 114.02, +2.29) and ExxonMobil (XOM 94.19, +1.84) both gained near 2.0% while Royal Dutch Shell (RDS.A 69.30, +1.81) surged 2.7% amid press reports the company may be interested in acquiring BP (BP 40.72, +0.89).

Elsewhere, financials (+1.0%) and industrials (+0.8%) were the only other outperformers among cyclical sectors. The industrial space rallied behind transport stocks with their strength sending the Dow Jones Transportation Average higher by 1.2%.

Meanwhile on the countercyclical side, the health care sector (+1.1%) held a solid gain throughout the session with biotechnology providing support. The iShares Nasdaq Biotechnology ETF (IBB 306.87, +6.25) jumped 2.1% to a fresh record high. As for the remaining defensively-oriented groups, consumer staples (+0.4%) and telecom services (-1.8%) lagged while the utilities sector (+0.7%) ended just ahead of the broader market.

Treasuries finished on their lows with the 10-yr yield up five basis points at 2.29%.

Economic data was limited to the Construction Spending report for October, which increased 1.1% while the consensus expected an increase of 0.5%. The value of construction put in place increased 0.9%, which will be a positive factor in Q4 GDP computations.

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while the ADP Employment Change report for November will cross the wires at 8:15 ET ( consensus 225K). Third quarter Productivity (consensus 2.4%) and Unit Labor Costs data (expected 0.0%) will be reported at 8:30 ET while the November ISM Services report (consensus 57.5) will be released at 10:00 ET. Also of note, the Federal Reserve will release its December Beige Book at 14:00 ET.

Nasdaq Composite +13.9% YTD
S&P 500 +11.8% YTD
Dow Jones Industrial Average +7.9% YTD
Russell 2000 +0.4% YTD

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