Day Traders Diary


The major averages ended the midweek session on a lower note with the S&P 500 (-0.5%) registering its second consecutive decline. The benchmark index settled near its worst level of the day while the Nasdaq Composite (-0.3%) outperformed.


Equities displayed modest gains in the early going, but relative weakness in several influential sectors prevented the S&P 500 from holding its early gain. The index made another brief appearance above its flat line during the early afternoon, but slid to lows before the closing bell.


The reasons for today's retreat were not particularly difficult to find as economic data reported this morning disappointed while quarterly earnings received since yesterday's closing bell did not inspire confidence either.


Eight sectors registered losses with four falling 1.0% or more. The financial sector (-1.0%) settled among the laggards after showing relative weakness throughout the day. Three major components reported earnings with Bank of America (BAC 15.64, +0.17) adding 0.8% in reaction to a bottom-line beat on in-line revenue while JPMorgan Chase (JPM 59.99, -1.56) and Wells Fargo (WFC 51.50, -0.36) surrendered 2.5% and 0.7%, respectively. JPMorgan Chase reported in-line earnings on below-consensus revenue while Wells Fargo delivered a one-cent beat.


Wells Fargo's report highlighted a quarter-over-quarter decline in mortgage originations, which was roughly in-line with seasonal trends. That being said, the news was met with selling in the homebuilder space that sent the iShares Dow Jones US Home Construction ETF (ITB 26.86, -0.69) lower by 2.5% while the consumer discretionary sector (-1.0%) ended among the laggards.


With the Q3 earnings season heating up, investors have begun receiving reports from the technology sector. Today, the focus was on Intel (INTC 32.80, +0.76) as the stock erased its early loss to end higher by 2.4% after the company reported better than expected results, but lowered its capital expenditures guidance.


Elsewhere among semiconductor names, SanDisk (SNDK 68.70, +6.93) soared 11.2% after Bloomberg reported the company is exploring a sale with Micron (MU 18.82, +0.64) and Western Digital (WDC 83.19, -1.18) identified as potential suitors. A separate report from Bloomberg indicated that Fairchild Semiconductor (FCS 16.35, +2.21) has hired bankers in preparation for a sale.


The M&A speculation was not done there as the late afternoon featured reports indicating Analog Devices (ADI 60.99, +4.94) may merge with Maxim Integrated (MXIM 38.33, +3.62). The two names posted respective gains of 8.8% and 10.4% while the PHLX Semiconductor Index surged 3.8%.


Moving to the countercyclical side, the health care sector (-0.3%) settled a bit ahead of the broader market while the consumer staples sector (-1.1%) struggled with shares of Wal-Mart (WMT 60.03, -6.70) diving 10.0% after the company's Chief Financial Officer said operating expenses are expected to exceed sales growth during fiscal year 2016.


The retreat in stocks lured some money into the Treasury market. The 10-yr note climbed to a high during the late afternoon, sending its yield lower by seven basis points to 1.98%.


Today's session saw the strongest volume of the week as more than 860 million shares changed hands at the NYSE floor.


Economic data included PPI, Retail Sales, Business Inventories, and MBA Mortgage Index:


Producer prices declined 0.5% in September after being unchanged in August while the consensus expected a decrease of 0.3%

Final demand for goods declined 1.2% in September after decreasing 0.6% in August, representing the largest decline since a 1.9% drop in January

Excluding food and energy, core PPI declined 0.3% in September after increasing 0.3% in August while the consensus expected an increase of 0.1%

Retail sales increased 0.1% in September after a downward revision resulted in no growth (from 0.2%) in August while the consensus expected an increase of 0.2%

The one bright spot in September was the motor vehicle sector as spending at auto dealers rose 1.8%, which was in-line with the impressive reports from the motor vehicle manufacturers that were released a couple of weeks ago

Excluding autos, retail sales declined 0.3% in September after declining a downwardly revised 0.1% (from +0.1%) in August while the consensus expected a decline of 0.1%

Business inventories were flat for a second consecutive month in August following a slight downward revision (from 0.1%) in July. The consensus expected an increase of 0.1%

Manufacturer (-0.3%) and merchant wholesalers (0.1%) already reported their August results. The only piece of new information was that retailer inventories increased 0.3% in August after increasing 0.7% in July

The weekly MBA Mortgage Index tumbled 27.6% to follow last week's 25.5% spike

Tomorrow, weekly Initial Claims ( consensus 269K), September CPI (consensus -0.2%), and October Empire Manufacturing survey (expected -8.0) will be released at 8:30 ET while the Philadelphia Fed Survey for October will cross the wires at 10:00 ET. Also of note, the September Treasury Budget (consensus $95.00 billion) will be released at 11:00 ET.


Nasdaq Composite +1.0% YTD

S&P 500 -3.1% YTD

Dow Jones Industrial Average -5.0% YTD

Russell 2000 -5.6% 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.