Day Traders Diary


The stock market followed up Friday's broad-based rally with an outing on Monday that never got on track due to a variety of reasons:

Technical resistance

The S&P 500 got brushed back early following a test of its closing high for the year (2117.69)

Rising long-term rates with the yield on the 10-yr note hitting new highs for the year at 2.27% and the 30-yr bond yield jumping 13 basis points to 3.03%

Selling was steady all day and unwound all of Friday's post-employment report gains

A particularly weak showing from the energy sector (-2.1%), which failed to get on track after news reports indicated OPEC expects oil prices to stay below $100 for the next decade

Concerns about the state of China's economy after the People's Bank of China announced an interest rate cut for the third time in the last six months

Main lending rate was lowered 25 basis points to 5.10%

Deposit rate was reduced 25 basis points to 2.25%

Ongoing angst about Greece's ability to win access to the next bailout tranche

Relative weakness in Apple (AAPL 126.32, -1.30, -1.0%); and

A lack of leadership in general

Every sector finished lower

The energy sector was the only sector to lose more than 1.0%

By and large, the lack of follow through after testing the all-time closing high took the wind out of the market early and then the market trended steadily lower as long-term rates crept steadily higher.

The Dow Jones Industrial Average (-0.5%), Nasdaq Composite (-0.2%), and S&P 500 (-0.5%) all ended the day in red figures.  The Russell 2000 (+0.2%) finished off its highs for the day, but still managed to close the session higher.

There wasn't any economic data of note out of the U.S. today, yet things will get more interesting on that front later in the week with the release of the April Retail Sales report on Wednesday, the April Producer Price Index on Thursday, and the April Industrial Production report on Friday.

On a related note, San Francisco Fed President Williams (an FOMC voter) told CNBC that he believes the first quarter weakness was an anomaly and that he expects the economy to rebound.  That didn't help sentiment at the front of the Treasury curve either as the yield on the 2-yr note jumped four basis points to 0.62%.

The three major indices ended the day with a whimper, finishing at or near their lows for the session.  After falling 15% on Friday, the CBOE Volatility Index increased 7.3% on Monday

Trading volume was light with just 680 million shares changing hands at the NYSE.  That was approximately 14% below the volume seen in Friday's rally effort.

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