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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Day Traders Diary

9/25/15

The stock market finished a down week on a sloppy note with the S&P 500 (-0.1%) surrendering a solid intraday gain during the final two hours of action to end flat. The benchmark index locked in a weekly decline of 1.4% while the Nasdaq Composite (-1.0%) underperformed, ending the week lower by 2.9%. For its part, the Dow Jones Industrial Average (+0.7%) ended Friday in the green as blue chips avoided volatility in the biotech space.

 

Equity indices spiked out of the gate in response to early morning strength in the futures market, which coincided with solid gains in Europe. To that point equity indices in France, Germany, and the UK rebounded after yesterday's struggles, gaining between 2.6% and 3.0% with automakers taking part in the rally. That rally lifted U.S. equity futures, but once the U.S. session began, the S&P 500 nestled into seven-point range that held into the afternoon.

 

The S&P 500 drifted near its high through the morning, supported by the financial sector (+1.5%) in particular. That heavily-weighted group held the lead after Federal Reserve Chair Janet Yellen spoke last evening, reminding that the Fed is still intent on raising rates by year's end. Meanwhile, most other sectors also held solid intraday gains, but a late afternoon dive in the biotech industry group proved too large to be ignored by the market.

 

Interestingly, the Nasdaq Composite hinted at the afternoon weakness, steadily marching lower from its opening high throughout the day. Large cap biotechnology listings like Amgen (AMGN 138.60, -4.91), Celgene (CELG 108.45, -5.43), Gilead Sciences (GILD 100.14, -2.37), and Regeneron (REGN 491.43, -30.57) lost between 2.3% and 5.9% while the iShares Nasdaq Biotechnology ETF (IBB 310.24, -15.98) declined through the morning, accelerating its retreat into the afternoon to end lower by 4.9% after being down more than 6.0%.

 

For the week, the ETF sank 13.0%, suffering from a one-two punch that started with Monday's remarks from presidential candidate Hillary Clinton, who said she is interested in introducing price controls into the pharmaceutical industry. In addition, yesterday's reminder from Fed Chair Yellen about the potential rate hike by year's end may have also factored into the selling considering the industry has benefited greatly from rock-bottom rates. The weakness in biotechnology ensured a sharply lower finish for the health care sector (-2.9%), which surrendered nearly 6.0% for the week.

 

Elsewhere, the consumer discretionary sector (unch) displayed relative strength intraday, but fell victim to the afternoon selling, ending in-line with the market. That masked an 8.9% surge in the shares of Nike (NKE 125.00, +10.21) after the athletic apparel giant cruised past earnings/revenue estimates and reported higher than expected futures orders.

 

Interestingly, the afternoon dive in equities had essentially no impact on Treasuries as 10-yr note held a bit above its morning low into the close with its yield rising four basis points to 2.17%.

 

Meanwhile, the CBOE Volatility Index (VIX 23.26, -0.21) started the day with a two-point loss, but inched higher through the morning, indicating some investors used the early strength to increase their hedges. The VIX then accelerated its climb during the afternoon to end little changed as the slide in the S&P 500 invited wholesale demand for downside protection.

 

Today's affair invited above-average volume with more than XXX million shares changing hands at the NYSE floor.

 

Economic data was limited to the third revision of Q2 GDP and the Michigan Sentiment Index:

 

Second quarter GDP growth was revised up to 3.9% in the third estimate from 3.7% while the Briefing.com consensus expected the reading to remain at 3.7%

GDP increased 0.6% in Q1 2015

Real final sales were revised up to 3.9% from 3.5%, representing the biggest quarterly gain since a 4.3% increase in Q3 2014

Overall, the revisions in the third estimate were strong across the board. The only negative contributions came from inventories and net exports while all of the other sectors contributed more positively to growth in the third estimate

The University of Michigan Consumer Sentiment Index was revised up to 87.2 in the final September reading from 85.7 while the Briefing.com consensus expected a revision up to 87.0

The Expectations Index was revised up to 78.2 from 76.4, but is still down from 83.4 in August

The Current Conditions Index was revised up to 101.2 from 100.3, but remains down from 105.1 in August

On Monday, August Personal Income, Personal Spending and Core PCE data will be released at 8:30 ET while August Pending Home Sales will be announced at 10:00 ET.

 

Nasdaq Composite -1.1% YTD

S&P 500 -6.2% YTD

Russell 2000 -6.8% YTD

Dow Jones Industrial Average -8.5% 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.