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Leigh Baldwin & Co.

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Day Traders Diary

8/20/15

The stock market registered its third consecutive decline on Thursday with the S&P 500 (-2.1%) slashing below its 200-day moving average (2,078). The benchmark index slid to levels not seen since early February while the Nasdaq Composite (-2.8%) displayed relative weakness throughout the day.

 

The daylong selloff was brought on by a heightened sense of uncertainty among investors, pulling the S&P 500 into the red for 2015 (-1.1%). To be sure, some of the uncertainty (rate-hike speculation, concerns about the global economy, plunging commodity prices) had been brewing for a while, whereas today's session reminded investors about ongoing concerns related to China and Greece.

 

Overnight, China's Shanghai Composite tumbled 3.4% amid reports the country's official GDP target could be lowered to 6.5% from 7.0%. Sellers maintained control despite a CNY120 billion injection from the People's Bank of China into capital markets.

 

As for Greece, Prime Minister Alexis Tsipras resigned from his post and called for a snap election, set for September 20, just three days after the FOMC concludes its September meeting. It is worth noting that there are indications Greece's minority parties could try to form a coalition government, which would block the September 20 vote.

 

All ten sectors ended the day in negative territory with cyclical sectors pacing the retreat while two of four countercyclical groups (consumer staples and utilities) posted losses slimmer than 1.0% apiece. The rate-sensitive utilities sector (-0.6%) ended ahead of its peers thanks to lower Treasury yields (10-yr yield -4 bps to 2.08%). The utilities sector is the only group that will enter the Friday session with a razor-thin week-to-date gain (+0.02%) while the remaining nine groups hold weekly losses between 0.9% (telecom services) and 5.4% (energy).

 

The energy sector has paced this week's retreat, but the growth-sensitive group finished today's session just behind the broader market after showing some relative strength in the early going. That brief strength coincided with an intraday gain in crude oil, but the energy component retreated during the afternoon to end the pit session little changed at $41.26/bbl.

 

Elsewhere among cyclical sectors, heavily-weighted consumer discretionary (-2.8%) and technology (-2.5%) underperformed throughout the day, which prevented the market from stringing together a rebound, considering the two groups represent more than 30% of the entire market.

 

The top-weighted technology sector suffered from broad weakness with large cap names like Apple (AAPL 112.65, -2.36), Google (GOOGL 679.48, -14.56), Facebook (FB 90.56, -4.75), and Microsoft (MSFT 45.75, -0.86) losing between 1.9% and 5.0%. High-beta chipmakers also registered sharp losses with the PHLX Semiconductor Index diving 3.8% with all 30 components ending in the red.

 

Today's selloff invited above-average participation with more than 900 million shares changing hands at the NYSE floor.

 

Economic data included Initial Claims, Existing Home Sales, Leading Indicators, and Philadelphia Fed Survey:

 

Initial claims for the week ending August 15 were 277,000, up from the prior week's downwardly revised level of 273,000 (from 274,000) while the Briefing.com consensus estimate expected a reading of 272,000

The four-week moving average for claims increased by 5,500 to 271,500, but remains near multi-decade lows

Existing Home Sales for July increased 2.0% from June to an annualized rate of 5.59 million units while the Briefing.com consensus expected a reading of 5.42 million

Sales in July were at their highest level since February 2007 and were up 10.3% from the year-ago period, which marked the tenth consecutive month in which existing home sales increased year-over-year

The Leading Indicators report for July was down 0.2% while the Briefing.com consensus expected an increase of 0.2%

The Philadelphia Fed Survey for August rose to 8.3 from 5.7 while economists polled by Briefing.com had expected an improvement to 7.0

There is no economic data on tomorrow's schedule.

 

Nasdaq Composite +3.0% YTD

S&P 500 -1.1% YTD

Russell 2000 -2.6% YTD

Dow Jones Industrial Average -4.7% 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.