Day Traders Diary


It was a running of the bulls on Thursday and "re-examine" was the trigger that sparked the charge. The S&P 500 soared 1.7%, overtaking its 100-day moving average (2,038) in the process. The benchmark index settled near its best level of the day, registering its first close above the 100-day average since August 17, as hopes for more stimulus overshadowed mixed corporate earnings.


The stock market was off to the races after equity futures revved higher an hour before the opening bell. The pre-market activity took place in response to comments from European Central Bank President Mario Draghi, who addressed the media following the latest ECB policy meeting. During his press conference, Mr. Draghi said that the central bank will "re-examine" its asset purchases at the December meeting. This was immediately interpreted as a harbinger of more monetary easing in the near future, sending the euro lower while European equities and U.S. futures spiked. Those moves accelerated after Mr. Draghi revealed that the governing council had discussed lowering the deposit facility rate at today's policy meeting. Markets in France, Germany, Spain, and Italy jumped between 2.0% and 2.5% while the euro slid throughout the session to 1.1110 against the dollar after trading just above 1.1300 prior to Mario Draghi's press conference. As a result, the Dollar Index (96.44, +1.37) spiked 1.4%, returning to levels last seen in late September.


Nine sectors ended the day with gains of 1.2% or more, masking the mixed nature of quarterly reports released between yesterday's closing bell and today's open. For instance, Caterpillar (CAT 70.88, +1.98) spiked 2.9% despite missing estimates and lowering its earnings guidance while 3M (MMM 156.00, +6.18) jumped 4.1% after missing revenue estimates, lowering its guidance, and announcing restructuring plans that will involve 1,500 layoffs worldwide. Meanwhile, American Express (AXP 72.50, -4.01) also delivered a disappointing report, but did not get lifted by the tide, falling 5.2%.


To be fair, a few companies delivered better than expected reports with McDonald's (MCD 110.87, +8.33) surging 8.1% to a fresh all-time high and Texas Instruments (TXN 58.09, +6.19) spiking 11.9% after both beat their respective estimates. Texas Instruments contributed to a 3.5% spike in the PHLX Semiconductor Index, which in turn, underpinned the technology sector (+2.3%). That being said, even the two standouts of the day fit an all-too-familiar theme of bottom-line beats combined with sluggish revenue growth.


Elsewhere, PulteGroup (PHM 18.16, -1.29) and Kinder Morgan (KMI 29.75, -1.67) posted respective losses of 6.6% and 5.3% in reaction to disappointing reports; however, their weakness was overshadowed by the broad market strength.


Similarly, Valeant Pharmaceuticals (VRX 109.87, -8.74) had another woeful showing, tumbling 7.4% to extend its two-day loss to 24.7% after Citron Research voiced concerns of potential accounting fraud at the biotech company. On a related note, the health care sector (-0.6%) spent the day in negative territory.


Treasuries bounced around their flat lines throughout the day with the 10-yr yield respecting a six-basis point range before ending unchanged at 2.03%.


Today's trading volume was well above average with more than a billion shares changing hands at the NYSE floor.


Economic data included Initial Claims, Existing Home Sales, Leading Indicators, and FHFA Housing Price Index:


The weekly initial claims level increased to 259,000 for the week ending October 17 from an upwardly revised 256,000 (from 255,000) while the consensus expected an increase to 265,000

The four-week moving average fell to 263,250 from 265,250, representing the lowest level since December 1973

Existing home sales increased 4.7% in September to 5.55 million from a downwardly revised 5.30 million (from 5.31 mln) while the consensus expected an increase to 5.39 million

Unfortunately, the growth in sales may not stable, considering much of the gain resulted from an increase in all-cash and investor demand

All-cash sales accounted for 24% of all sales in September, up from 22% in August. Individual investors purchased 13% of existing homes in September, up from 12% in August

The Conference Board's Leading Economic Index declined 0.2% (consensus -0.1%) in September after a downward revision resulted in no change (from 0.1%) in August

The FHFA Housing Price Index for August rose 0.3%, which followed an unrevised increase of 0.6% in July

There is no economic data on tomorrow's schedule.


Nasdaq Composite +3.9% YTD

S&P 500 -0.3% YTD

Dow Jones Industrial Average -1.9% YTD

Russell 2000 -4.1% YTD

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