Day Traders Diary


The major averages ended an abbreviated trading week on a cautious note, which wasn't all that surprising since the weekend will feature a Sunday referendum in Greece. The S&P 500 settled just below its flat line, ending the week lower by 1.2%, while small cap stocks underperformed with the Russell 2000 losing 0.7% to end the week lower by 2.5%.

Equity indices held modest gains at the start after the Nonfarm Payrolls report for June missed estimates (223,000; consensus 230,000) with the wage component showing no monthly growth. The lack of wage growth was viewed as an argument in favor of the Federal Reserve delaying its first rate hike, evidenced by a surge in the Treasury market. The 10-yr note backed away from its high ahead of the close, but still ended firmly in the green with the benchmark yield slipping four basis points to 2.38%.

Despite opening on a higher note, stocks retreated from their early levels, turning negative during late morning action. Interestingly, the benchmark index slipped below its flat line after the International Monetary Fund admitted that Greece will need approximately EUR50 billion in funds over the next three years and that a 20-year grace period should take place before any repayment begins. The comments from the IMF are likely to galvanize the 'no' camp ahead of Sunday's referendum in Greece.

Six sectors ended the day in negative territory while energy (+0.4%), technology (+0.2%), telecom services (+0.3%), and utilities (+1.4%) posted gains. The utilities sector held the lead throughout the session thanks to the morning drop in Treasury yields. The rate-sensitive sector was the only group that ended the week in the green, adding 1.1% since last Friday.

For its part, the energy sector was able to end in the green even as crude oil surrendered its intraday gain, ending the pit session unchanged at $56.93/bbl. For the week, WTI crude surrendered 4.5% while the energy sector lost 1.9%.

Elsewhere among cyclical groups, the technology sector (+0.2%) struggled early on, but the group rallied into the close, lifting the benchmark index off its session low. Chipmakers led the afternoon rebound with the PHLX Semiconductor Index adding 0.5%.

There wasn't much in the way of corporate news today, but Health Net (HNT 71.57, +6.51) jumped 10.0% after agreeing to be acquired by Centene (CNC 74.44, -6.46) for roughly $78.57/share in cash and stock, which represents a 21.0% premium to Wednesday's closing price. Meanwhile, the broader health care sector (-0.3%) ended among the laggards while biotech names finished little changed with iShares Nasdaq Biotechnology ETF (IBB 370.17, +0.27) adding 0.1%.

Today's trading volume was well below average with roughly 700 million shares changing hands at the NYSE floor.

Economic data included Nonfarm Payrolls, Initial Claims, and Factory Orders:

Nonfarm payrolls added 223,000 jobs in June after adding a downwardly revised 254,000 (from 280,000) in May while the consensus expected an increase of 230,000 

Government payrolls were flat, and the entire increase in payrolls came from the private sector as private payrolls increased by 223,000 while the consensus expected an increase of 225,000 

Although the payroll data was not far from expectations, the details of the report highlight extreme weaknesses as average workweek and hourly earnings were both flat in June  

Total aggregate earnings increased a minuscule 0.1% in June, down from a 0.5% gain in May 

The unemployment rate fell to 5.3% in June from 5.5% while the consensus expected a decline to 5.4%; however, the entire decrease was due to a decline in labor force participation as opposed to employment growth

The initial claims level increased to 281,000 for the week ending June 27 from an unrevised 271,000 while the consensus expected an increase to 271,000 

Despite the big increase, the four-week moving average increased by only 1,000 to 275,000, leaving the overall trend near a 15-year low

Factory orders declined 1.0% in May following a downwardly revised -0.7% (from -0.4%) decline in April while the consensus expected a decline of 0.5% 

Durable goods orders declined 2.2% in May, which was revised down from a 1.8% decline in the advance report 

The entire decline resulted from continued weakness in the transportation sector with those orders declining 6.5% in May after falling 4.0% in April

Monday's data will be limited to the 10:00 ET release of the ISM Services Index for June.


Nasdaq Composite +5.8% YTD 

Russell 2000 +3.6% YTD 

S&P 500 +0.8% YTD 

Dow Jones Industrial Average -0.5% YTD

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