Day Traders Diary


The major averages strung together their second consecutive advance with the S&P 500 climbing 0.9%. The benchmark index extended its weekly gain to 1.7% while the Nasdaq Composite (+0.6%) underperformed, but still brought its week-to-date advance up to 1.4%.


Equities spent the first hour of the day near their flat lines before racing higher alongside the energy sector (+2.8%), which had shown relative strength from the start. That strength was closely linked to the buying surge in crude oil futures that sent the energy component higher by 5.8% to $47.15/bbl. A significant portion of the rally developed after the release of the weekly EIA inventory report, which showed a draw of 2.104 million barrels.


The sharp rally in the energy sector underpinned the overall market, which rallied despite the uncertainty surrounding tomorrow's FOMC policy statement, which could be highlighted by the first rate hike in more than nine years.


To be fair, there were some other areas of relative strength. Notably, the consumer staples sector (+1.1%) saw increased activity thanks to M&A rumblings among brewers and distillers after Anheuser-Busch Inbev (BUD 115.43, +7.39) approached SABMiller (SBMRY 56.45, +9.72) about a potential acquisition. SABMiller expressed willingness to entertain discussions, and the news boosted its peers, none more so than Molson Coors Brewing (TAP 82.98, +10.34), which surged 14.2%.


The news of a merger brewing in the consumer sector invited the heaviest NYSE floor volume of the week (863 million), but tomorrow's session is all but sure eclipse today's tally once the FOMC decision is announced.


Elsewhere, the industrial sector (+0.7%) settled not far behind the broader market, doing so despite relative weakness among transport stocks. Specifically, the Dow Jones Transportation Average was limited to a gain of 0.2% as FedEx (FDX 149.63, -4.37) weighed. Shares of FDX surrendered 2.8% in reaction to below-consensus earnings and guidance, dragging its peer, UPS (UPS 100.08, -0.44), lower by 0.4%.


The industrial sector settled just ahead of financials (+0.6%) while another cyclical group—technology (+0.4%)—underperformed throughout the day with Apple's (AAPL 116.35, +0.07) flat close keeping the sector behind the broader market.


The relative weakness in the technology sector translated into underperformance for the Nasdaq, but it is worth noting the index was also pressured by biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 355.14, -2.32) lost 0.7%, erasing the bulk of yesterday's gain. For its part, the health care sector ended behind the remaining nine groups, but still added 0.3%.


Unlike stocks, Treasuries spent the day inside a narrow range, slipping to lows into the close with the 10-yr yield rising one basis point to 2.30%.


Economic data included CPI and the NAHB Housing Market Index:


Consumer prices declined an in-line 0.1% in August after increasing 0.1% in July

A steep 2.0% drop in energy costs was responsible for the downtick, representing the first decline in energy prices since a 1.3% drop in April

Food prices increased 0.2% for a second consecutive month

Excluding food and energy, core CPI increased 0.1% for a second consecutive month in August, which is what the consensus expected

There were no outliers in the core price index and trends remain soft and stable.

The NAHB Housing Market Index for September rose to 62 from 61 while the consensus expected the reading to hold at 61

Tomorrow, weekly Initial Claims ( consensus 275,000), August Housing Starts (consensus 1.158 million), Building Permits (expected 1.158 million), and the Q2 Current Account Balance (expected deficit of $112.20 billion) will be released at 8:30 ET while the Philadelphia Fed Survey for September will cross the wires at 10:00 ET. The day's data will be topped off with the 14:00 ET release of the FOMC policy statement and fed funds rate decision (consensus unchanged at 0.25%).


Nasdaq Composite +3.2% YTD

Russell 2000 -2.3% YTD

S&P 500 -3.1% YTD

Dow Jones Industrial Average -6.1% YTD

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