Day Traders Diary


The stock market ended the Tuesday session on a lower note despite starting the day with a sharp spike. The S&P 500 lost 1.4% after being up 2.9% while the Nasdaq Composite surrendered 0.4% after being up 3.6%.


The market began the day with a broad-based spike after most global stock markets rebounded during overnight action. Interestingly, the rebound did not include China's Shanghai Composite as the index lost 7.6%. That being said, the focus will be on the index tonight considering the People's Bank of China cut its main lending rate 25 basis points to 4.6% and lowered its reserve requirement ratio 50 basis points to 18.0% this morning.


The PBoC rate-cut announcement took place well after Asian markets ended for the day, and the news was met with a spike in S&P futures. Once the trading day began, the S&P 500 rallied through the first two hours of action, but returned into the middle of its trading range during the afternoon, and fell to lows during the final 60 minutes of the session.


In some ways, the selling during the final hour resembled action observed on Monday morning as liquidity dried up notably and bid-ask spreads widened past typical levels. The S&P 500 surrendered nearly 40 points during the final hour, pulling all sectors into the red. Interestingly, the utilities sector (-3.2%) ended at the bottom of the leaderboard as the rate-sensitive group suffered from higher yields intraday and extended its losses during afternoon selling.


More notably, heavily-weighted sectors like financials (-1.7%), industrials (-1.6%), and health care (-1.4%) ended in the red while consumer discretionary (-0.4%) and technology (-1.2%) surrendered their gains after being up more than 3.0% apiece.


The late afternoon tumble occurred after the Treasury market closed for the day, but 10-yr note futures rallied after the cash close. The benchmark instrument settled on its low with the yield up 13 basis points at 2.13%, but safe-haven demand drove the yield to 2.09% after the cash close.


Interestingly, the CBOE Volatility Index (VIX 37.08, -3.66) ended on its high, but still finished the day well below yesterday's settlement despite the late swoon.


Once again, corporate news was relegated to the backburner, but investors did receive a couple earnings reports this morning. Best Buy (BBY 32.95, +3.68) soared 12.6% after beating earnings and revenue estimates while Toll Brothers (TOL 35.08, -2.98) lost 7.8% after missing earnings and revenue estimates.


Economic data included Consumer Confidence, New Home Sales, Case-Shiller 20-city Index, and FHFA Housing Price Index:


The Conference Board's Consumer Confidence Index increased to 101.5 in August from an upwardly revised 91.0 (from 90.9) while the consensus expected an increase to 93.1

The August jump in confidence wiped away all of the discomfort from July and returned the index past June levels (99.8) to the highest mark since January 2015

New home sales increased 5.4% in July to 507,000 from a downwardly revised 481,000 (from 482,000) while the consensus expected an increase to 511,000

After starting the year on a tear, new home sales have settled into a range of around 500,000 per month since March

The Case-Shiller 20-city Home Price Index for June rose 5.0% against a 5.1% increase expected by the consensus

This followed the previous month's increase of 4.9%

The FHFA Housing Price Index for June rose 0.2%, which followed a revised increase of 0.5% in May (from 0.4%)

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while July Durable Orders ( consensus -0.6%) will be reported at 8:30 ET.


Nasdaq Composite -4.9% YTD

Russell 2000 -8.4% YTD

S&P 500 -9.3% YTD

Dow Jones Industrial Average -12.1% YTD

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