Day Traders Diary


The S&P 500 could not avoid its third consecutive decline on Friday as rising rate hike expectations weighed on equities. To be fair, the benchmark index missed a green close by 0.74 points while the Dow (+0.3%) and Nasdaq Composite (+0.4%) erased their opening losses.

Equities stumbled at the start after the October Employment report easily surpassed expectations, thus increasing the likelihood of a fed funds rate hike at the December policy meeting to 69.8% from yesterday's 58.1%. Specifically, October nonfarm payrolls came in at 271,000 while the consensus expected a reading of 181,000. Also of note, hourly earnings rose 0.4% while the consensus expected an uptick of 0.2%.


Once the report crossed the wires, investors rushed into the greenback while Treasuries and equity futures retreated. The Dollar Index (99.14, +1.21) held its ground to end the day higher by 1.2% near levels last seen in mid-April. As for Treasuries, the 10-yr note finished near its low with the benchmark yield rising ten basis points to 2.33%, representing the highest settlement since late July.


Similar to Treasuries, equities slumped in immediate reaction to the report, but unlike Treasuries, the stock market staged a rebound off its opening lows. Six sectors ended the day with losses while financials (+1.1%) and technology (+0.4%) outperformed throughout the day, helping the market return into the neighborhood of its flat line by the closing bell.


The financial sector rallied due to the rising probability of a December rate hike, extending this week's gain to 2.5%, which put the sector ahead of its peers. Meanwhile, the top-weighted tech space spent the day near its flat line with broad strength in the chipmaker space overshadowing a mixed performance from large cap sector components. To that point, the PHLX Semiconductor Index surged 2.6% with Skyworks (SWKS 85.99, +5.71) and NVIDIA (NVDA 31.55, +3.84) soaring 7.1% and 13.9%, respectively, in reaction to better than expected results.


On the downside, countercyclical sectors faced the most aggressive selling with consumer staples (-1.1%), telecom services (-0.7%), and utilities (-3.6%) ending at the bottom of the leaderboard. That being said, the energy sector (-0.4%) also finished among the laggards despite showing considerable strength earlier this week. The growth-sensitive group narrowed its weekly gain to 1.1% while crude oil surrendered 2.0% on Friday, ending the week lower by 4.8% at $44.29/bbl.


Today's participation was well ahead of average with more than 975 million shares changing hands at the NYSE floor.


Taking another look at today's employment data:


Nonfarm payrolls increased by 271,000 ( consensus 181,000)

September nonfarm payrolls revised to 137,000 from 142,000

Private sector payrolls increased by 268,000 ( consensus 160,000)

September private sector payrolls revised to 149,000 from 118,000

Unemployment rate slipped to 5.0% ( consensus 5.1%) from 5.1% in September

The U6 unemployment rate, which accounts for the total unemployed plus persons marginally attached to the labor force and the underemployed, was 9.8% versus 10.0% in September

Average hourly earnings increased 0.4% ( consensus 0.2%) after being unchanged in September

Over the last 12 months, average hourly earnings have risen 2.5% versus 2.3% in September, representing the highest year-over-year rate since July 2009

The labor force participation rate held at 62.4% for the second month in a row

On a separate note, the Consumer Credit report for September showed an increase of $28.90 billion while the consensus expected growth of $18.00 billion. It is worth noting that the September reading represented the biggest jump in non-revolving credit since July 2011.


Monday's session will be free of economic data.


Nasdaq Composite +8.5% YTD

S&P 500 +1.8% YTD

Dow Jones Industrial Average +0.3% YTD

Russell 2000 -0.4% YTD

Week in Review: Nasdaq Leads Stocks Higher

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.