Day Traders Diary


 The major averages began their week on a higher note as the S&P 500 (+0.8%) rebounded from last week's decline of 1.3%. Contributing factors for today's trade included below-consensus economic data, weakness from the oil pit, a leg lower in the dollar, and the outperformance of the heavily-weighted consumer discretionary (+1.4%) and financial (+1.1%) sectors. The Nasdaq Composite (+0.9%) ended ahead of the benchmark index (+0.8%) and the Dow Jones Industrial Average (+0.7%).

Equity indices began their session on a wobbly note as investors digested below-consensus economic data out of China and the U.S. Over the weekend, China released April PMI data that missed expectations (50.1; estimate: 50.3), but continued to show expansion. Reaction from China was muted as both the Shanghai Composite and the Hang Seng were closed for public holidays.

On the home front, the U.S. ISM Index for April (50.8; consensus 51.4) and Construction Spending for March (+0.3%; consensus +0.6%) each missed estimates. However, the datapoints could be seen as supportive of the Fed opting to hold off on raising rates at its June meeting.

The major averages extended their rally throughout the day as upticks in the heavily-weighted consumer discretionary (+1.4%) and financial (+1.1%) sectors outweighed weakness from the oil pit. All ten sectors ended in positive territory with countercyclical consumer staples (+1.0%) and utilities (+0.8%) following the pair on the leaderboard.

In the consumer discretionary space (+1.4%), Amazon (AMZN 683.85, +24.26) extended its post-earnings winning streak by gaining 3.7%. Since reporting earnings on April 28, the company has gained 13.6%. Conversely, fellow F.A.N.G. member Netflix (NFLX 93.11, +3.08) gained 3.4%, but remains down 14.1% since disappointing investors with its quarterly report on April 18. Separately, Wynn Resorts (WYNN 94.28, +5.98) gained 6.8% after revenue, as reported by the Macau Gaming Inspection and Coordination Bureau, came in better-than-feared (-9.5% year-over-year).

Heavily-weighted component Microsoft (MSFT 50.61, +0.74) displayed relative strength in the technology sector (+0.7%). Fellow large-cap Apple (AAPL 93.65, -0.09) ended off its low, but extended its losing streak to an eighth session. On the M&A front, Oracle (ORCL 40.30, +0.44) jumped 1.1% after agreeing to acquire Opower (OPWR 10.29, +2.39) for $10.30 per share in an all cash transaction. The broader technology space gained 0.7% as it rebounded from last week's 3.6% decline.

In the financial sector (+1.1%), rate-sensitive real estate investment trusts demonstrated related strength after underperforming last week. On that note, Public Storage (PSA 252.57, +7.76) gained 3.2% after declining 4.7% last week. Elsewhere, AIG (AIG 56.59, +0.77) gained 1.4% ahead of this evening's earnings report.

The commodity-sensitive energy sector (UNCH) ended its day above its flat line as natural gas and oil finished lower. WTI crude ended its day lower by 2.6% at $44.75/bbl while natural gas finished down 6.4% to $2.04/MMbtu. In the group, Halliburton (HAL 42.05, +0.74) gained 1.8% after announcing that it would terminate its merger with Baker Hughes (BHI 47.40, -0.96).

The U.S. Dollar Index (92.60, -0.48) ended off its low as the greenback trimmed losses against the euro. The euro/dollar pair ended at 1.1525 (+0.6%) after bouncing off the 1.1470 level earlier today. Meanwhile, the dollar/yen pair ended flat at 106.45.

The Treasury complex finished at its session low with the yield on the 10-yr note rising three basis points to 1.87%.

Today's participation was above the recent average as more than 960 million shares changed hands on the NYSE floor.

Today's economic data included the April ISM Index and Construction Spending for March:

The Manufacturing ISM Index for April checked in at 50.8. That is down from 51.8 in March and 51.5 in the same period a year ago. The consensus estimate was pegged at 51.4, so the Manufacturing ISM Index report will qualify as another piece of weaker than expected data.

A number above 50 for this series denotes expansion in the manufacturing sector; however, the dip from March implies there was a slowdown in activity in April. This isn't the best signal for early second quarter growth expectations, yet it is a number the market could construe as being supportive of the argument that the Federal Reserve will hold off on raising rates at its June meeting.

The dip in April was driven by a drop in the New orders Index to 55.8 from 58.3. That is the fourth month in a row that the pace of new orders has slowed.

The Production Index fell to 54.2 from 55.3, and although the Employment Index rose to 49.2 from 48.1, it was below 50.0 for the fifth straight month.

The biggest uptick was seen in the Prices Index, which jumped to 59.0 from 51.5 as manufacturers responded to higher raw material prices.

The Inventories Index fell to 45.5 from 47.0, marking the tenth consecutive month that they have contracted at a faster pace.

Total construction spending increased 0.3% in March ( consensus +0.6%), and followed some sizable revisions to construction spending data for the prior two months.

Specifically, revised data showed total construction spending increased 1.0% in February after it was previously reported to have declined 0.5%. The upshot of that positive revision was offset by a downward revision to January, which saw a 0.3% decline in total construction spending after a previously reported increase of 2.1%.

The increase in March was powered by a 1.1% increase in total private construction spending. That uptick was fueled by a 1.6% increase in residential spending and a 0.7% increase in nonresidential spending.

Total public construction spending declined 1.9% in March, dragged lower primarily by a 1.9% decline in nonresidential spending. The main pockets of weakness were a 7.6% decline in transportation spending and a 4.2% decline in sewage and waste disposal spending.

On a year-over-year basis, total construction spending is up 8.0%, which is a slower pace of growth than the 9.3% year-over-year rate seen in February.

Tomorrow's economic data will be limited to April Auto and Truck Sales, which will be released throughout the day. Separately, China's Caixin Manufacturing PMI will be released at 21:45 ET.


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