Day Traders Diary


It wasn't a good start to the shortened week for the stock market.  Each of the major indices fell at least 1.0% as buyers proved to be a reluctant bunch.

That reluctance started early and it continued for most of Tuesday's session, which saw the S&P 500 flirt with testing support at its 50-day simple moving average (2096).  The fact that the S&P 500 didn't pierce that level was perhaps the lone bright spot in Tuesday's action, which saw all ten sectors lose ground and all 30 Dow components end with a loss.

The catalysts for Tuesday's weakness were debatable, yet proximate causes included the following:
  • Some angst that the better than expected Durable Orders and New Home Sales reports for April fell in the realm of encouraging a rate hike from the Federal Reserve before the end of the year
  • A surge in the dollar, which weighed heavily on commodities and related stocks (the U.S. Dollar Index rose 1.3% to 97.29)
    • Crude prices -2.7% to $58.04/bbl
  • Greek officials firing a barb that the country could possibly miss its debt payment to the IMF next week
  • The continued underperformance of the Dow Jones Transportation Average (-1.6%), which is deemed to have leading indicator status; and
  • The absence of any leadership
The stock market managed to finish off its worst levels of the day as buying support came in just under 2100 on the S&P 500.

The worst-performing areas on the day were among the most economically-sensitive sectors, including energy (-1.6%), materials (-1.2%), and industrials (-1.1%).  The information technology sector (-1.4%), meanwhile, was another key drag on things with losses in Apple (AAPL 129.63, -2.91) factoring prominently in its underperformance.

Pockets of relative strength were found among the market's more defensive-oriented groups like telecom services (-0.4%), consumer staples (-0.7%), and utilities (-0.7%), although the consumer discretionary sector (-0.6%) was one cyclical sector that held up reasonably well.

Separately, Charter Communications (CHTR 179.78, +4.45) and Time Warner Telecom (TWC 183.60, +12.42) bucked the broader trend after it was announced that Charter will acquire Time Warner Telecom in a cash-and-stock deal valued at approximately $78.7 billion, including debt.

The stock market's weak showing and the rumblings about Greece contributed to a significant pickup in the CBOE Volatility Index (VIX 14.07, +1.94), which jumped 16%.  The latter hit its lows for the year last week, offering participants the opportunity to add some downside protection at relatively cheap prices.  Additionally, the 10-yr Treasury yield dropped eight basis points to 2.13% on some safe-haven positioning.

Given the scope of Tuesday's losses, it was no surprise to see decliners beat advancers at the NYSE and Nasdaq by a significant margin.  In turn, trading volume increased with 792 million shares changing hands at the NYSE.  That was comfortably ahead of last Tuesday when 739 million shares were traded, marking the heaviest trading session in the prior week. 

A look at today's economic data:
  • The Conference Board's Consumer Confidence Index increased to 95.4 in May from a downwardly revised 94.3 (from 95.2) in April. The Consensus expected the index to decrease to 94.0.
  • New home sales increased 6.8% in April to 517,000 from an upwardly revised 484,000 (from 481,000) in March. The Consensus expected new home sales to increase to 510,000. 
    • Sales topped 500,000 for the third time in the first four months of 2015. Trends are significantly stronger than they were at this time in 2014, when an average of only 421,000 homes were sold each month. 
    • Sales growth was the strongest in the Midwest (+36.8%), which offset declines in both the Northeast (-5.6%) and West (-2.3%). 
    • Supply problems continue to plague the sector. During normal periods of buying and selling, supply usually runs at about 6 months' at the current sales pace. Lackluster construction growth during the recovery has pushed the supply rate down to 4.8 months. 
    • The median new home sales price increased 8.3% y/y to $297,300. 
  • Durable goods orders declined 0.5% in April after increasing an upwardly revised 5.1% (from 4.4%) in March. The Consensus expected durable goods orders to decrease 0.6%.  A steep decline in defense (-12.8%) and nondefense (-4.0%) aircraft orders made up the bulk of the April decline. 
    • Excluding transportation, durable goods orders increased 0.5% in April after increasing an upwardly revised 0.6% (from 0.4%) in March. The consensus expected these orders to increase 0.3%. 
    • Orders of nondefense capital goods excluding aircraft increased 1.0% in April after increasing 1.5% in March. Shipments -- which factor into second quarter GDP calculations -- increased 0.8% in April after increasing 1.0% in March. That is the first time shipments of business capital have increased for two consecutive months since July and August 2014.


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