Day Traders Diary


The major averages ended the midweek session on a lower note following a trading day that featured numerous trading halts at home and abroad. The S&P 500 fell below its 200-day moving average (2,056), ending lower by 1.7% while the Nasdaq Composite (-1.8%) underperformed.


Equities slumped at the start of the session in response to the overnight weakness in the futures market that could be traced back to the continued selling efforts in China. The Shanghai Composite lost 5.9% on Wednesday and it was reported that more than 50% of A-share listings have now been halted due to volatility.


Futures on the S&P 500 held a 30-point decline during the overnight session, but cut their losses in half ahead of the New York open. The rebound took place amid a rally in Europe, following reports that Greek officials have requested a three-year bailout program that includes tax reforms; however, it remains to be seen whether this proposal differs from the one that was rejected by Greek voters during Sunday's referendum.


Once the U.S. session began, stocks retreated through the opening hour, hovering near their lows until 10:30 ET when trading at the floor of the New York Stock Exchange was halted for nearly four hours due to technical issues. Electronic trading venues were not affected by the halt, but the lack of participation from floor traders kept the market inside a narrow range until an afternoon resumption, which was followed by a drop to new lows.


All ten sectors registered losses with cyclical sectors showing relative weakness throughout the day. The materials sector (-2.2%) ended at the bottom of the leaderboard while top-weighted technology (-1.7%) and financials (-1.8%) also struggled to keep pace with the market.


For the second day in a row, chipmakers led the retreat in the technology sector with the PHLX Semiconductor Index tumbling 2.6%. The index extended its weekly decline to 4.4% with all 30 components ending the day in negative territory. Meanwhile, most large cap tech components did not fare much better while Microsoft (MSFT 44.24, -0.06) outperformed, shedding 0.1% after confirming plans to reduce its workforce by about 7,800 employees. The company said most of the job cuts will take place in its phone hardware division.


Elsewhere, the industrial sector was one of the leaders during yesterday's intraday turnaround, but the group finished today among the laggards. Similarly, transport stocks underperformed with the Dow Jones Transportation Average (-2.2%) ending beneath yesterday's session low. All 20 index components finished in the red with United Continental (UAL 52.82, -1.49) surrendering 2.7%. This morning, all United Continental flights were grounded for more than an hour with the company blaming a router issue for the outage.


Over on the countercyclical side, the utilities sector (-0.5%) outperformed while health care (-1.6%) finished just ahead of the broader market even as biotechnology struggled. The iShares Nasdaq Biotechnology ETF (IBB 362.78, -10.64) lost 2.9%.


Treasuries spent the entire day in positive territory with the 10-yr yield falling five basis points to 2.21%.


Today's participation was below average with fewer than 450 million shares changing hands at the NYSE floor.


Economic data was limited to the MBA Mortgage Index and Consumer Credit:


The weekly MBA Mortgage Index rose 4.6% to follow last week's 4.7% decline

Consumer credit increased by $16.10 billion in May after increasing an upwardly revised $21.40 billion (from $20.50 billion) in April while the consensus expected an increase of $18.20 billion

Tomorrow, weekly Initial Claims will be released at 8:30 ET ( consensus 276K).


Nasdaq Composite +3.7% YTD

Russell 2000 +1.9% YTD

S&P 500 -0.6% YTD

Dow Jones Industrial Average -1.7% YTD

All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.