Day Traders Diary


The major averages finished the midweek session on a flat note. The S&P 500 shed 0.1%, but still marked a fresh intraday record high at 2,134.72 while the Nasdaq Composite (unch) outperformed.


Equity indices spent the first half of today's session near their flat lines with the S&P 500 maintaining a seven-point range that was violated to the upside during afternoon action once the Federal Open Market Committee released the minutes from its April policy meeting. The index could not hold its afternoon gain and returned to the flat line by the close.


Above all, the minutes revealed that some participants believed that the weakness observed in the first quarter could extend into Q2 with many officials characterizing a rate hike in June as "unlikely." However, the minutes did not rule out a near-term rate hike in its entirety.


Treasuries retreated immediately following the release, but they returned to their afternoon levels shortly thereafter. The 10-yr note settled near its high with the benchmark yield slipping four basis points to 2.25%.


On a related note, the Dollar Index (95.50, +0.23) endured a whipsaw afternoon after holding a modest intraday gain. The index surged to its session high following the minutes and then slumped to its low, but still ended the day with a slim gain of 0.2%.


Five sectors ended in the green with three countercyclical groups showing relative strength throughout the day. Rate-sensitive telecom services (+0.5%) and utilities (+0.2%) benefitted from lower rates while the health care sector (+0.1%) was underpinned by biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 363.59, +3.11) gained 0.9% with the industry group contributing to the outperformance of the Nasdaq.


Similarly, high-beta chipmakers also gave a boost to the tech-heavy index. The PHLX Semiconductor Index added 0.2% with the move paced by a 4.3% gain in Analog Devices (ADI 66.18, +2.73) after the company reported a one-cent beat. For its part, the broader technology sector displayed afternoon strength, but returned to its flat line by the close.


Elsewhere among cyclical sectors, consumer discretionary (-0.2%), industrials (-0.4%), and financials (-0.4%) lagged throughout the day. Notably, the industrial sector suffered from losses among transport stocks that sent the Dow Jones Transportation Average lower by 2.0%. Airlines paced the slide with Delta Air Lines (DAL 43.62, -2.59), Southwest Airlines (LUV 37.19, -3.72), and United Continental (UAL 54.54, -6.27) losing between 5.6% and 10.3% after Southwest lowered its guidance. In addition, investors showed concern over potential pricing pressures that could result from the entry of three subsidized Arabian Gulf carriers into the U.S. market.


Lastly, the financial sector (-0.4%) spent the day among the laggards. The long-awaited settlement between the Department of Justice and five large banks was announced today with fines against Citigroup (C 54.89, -0.44), JPMorgan Chase (JPM 66.48, -0.53), Barclays (BCS 16.86, +0.56), UBS (UBS 21.96, +0.83), and Royal Bank of Scotland (RBS 11.05, +0.21) totaling $5.80 billion.


Today's participation was comparable to totals observed earlier in the week with fewer than 700 million shares changing hands at the NYSE floor.


Economic data was limited to the weekly MBA Mortgage Index, which fell 1.5% to follow last week's 3.5% decline.


Tomorrow, weekly Initial Claims ( consensus 270K) will be released at 8:30 ET while April Existing Home Sales (consensus 5.24 million), April Leading Indicators (expected 0.3%), and May Philadelphia Fed Survey (expected 8.0) will cross the wires at 10:00 ET.


Nasdaq Composite +7.1% YTD

Russell 2000 +4.5% YTD

S&P 500 +3.3% YTD

Dow Jones Industrial Average +2.6% YTD

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