Day Traders Diary


The stock market ended Wednesday on a mixed note, responding to a positive bottom-line reading from top-weighted Apple (AAPL 103.03, +6.36) and the latest policy statement from the Federal Open Market Committee. Other contributing factors impacting today's trade included weakness from the oil patch, softening in the dollar, and the outperformance of the heavily-weighted health care (+0.4%) and technology (+0.8%) sectors. The Nasdaq Composite (+0.6%) ended ahead of the Dow Jones Industrial Average (UNCH) and the S&P 500 (-0.1%).
Equity indices gained at the start of the session as investors responded to better-than-expected quarterly results from Apple (AAPL 103.03, +6.36) and further easing measures from Japan. Top-weighted Apple boosted the influential technology sector (+0.8%) after reporting above-consensus bottom-line results and issuing better-than-expected guidance for the fourth quarter. Separately, Japan's Nikkei (+1.7%) paced the advance overseas after Prime Minister Shinzo Abe unveiled a fiscal stimulus package totaling JPY28 trillion. The terms of the stimulus package are expected to be compiled next month, but there are doubts about how much direct stimulus will be involved.
The major averages pulled back from their opening highs shortly after the release of a disappointing weekly inventory report from the Department of Energy. The report showed a surprise increase in crude oil inventories (+1.67 million barrels; estimated: -2.25 million barrels) while gasoline stockpiles (+0.45 million barrels; consensus +0.03 million) also missed their mark. In response, the energy component fell from the $43.00/bbl price level, ending its day lower by 2.4% ($41.90/bbl; -$1.01).
The broader market hovered near its session low through the afternoon as investors looked ahead to the release of the FOMC's July policy statement. The statement struck a somewhat hawkish tone, indicating that near-term risks to the economic outlook had diminished. However, investors appear somewhat skeptical of the potential for a rate hike by the end of the year. The fed funds futures market currently reflects the implied probability of an interest rate hike at the December meeting at 46.8%, ticking down from yesterday's estimate of 51.5%.
The benchmark index ended off its low as technology (+0.8%), telecom services (+0.7%), and health care (+0.4%) led the advance. On the flipside, consumer staples (-1.5%), utilities (-1.2%), and energy (-1.0%) rounded out the board.
The influential technology sector (+0.8%) demonstrated relative strength as large cap component Apple (AAPL 103.03, +6.36) rallied 6.6%. Additionally, heavily-weighted Facebook (FB 123.34, +2.12) jumped 1.8% ahead of this evening's earnings report. The high-beta chipmakers finished ahead of the broader market as Cavium Networks (CAVM 46.84, +3.11) topped the price-weighted index. The company reported an in-line quarter, but raised its earnings estimates above consensus.
Biotechnology outperformed in the health care space (+0.4%) evidenced by the 2.4% gain in the iShares Nasdaq Biotechnology ETF (IBB 287.03, +6.75). Allergan (AGN 260.24, +11.29) helped lead the ETF after Teva Pharmaceuticals (TEVA 55.16, +0.85) announced that its acquisition of Allergan's generic division should close next week.
The Dow Jones Transportation Average (-1.5%) displayed relative weakness as rail names and freight companies underperformed. Norfolk Southern (NSC 90.14, -2.61) fell 2.8% after reporting that overall volume declined 7.0% year-over-year. However, the company did top bottom-line estimates. Separately, C.H. Robinson (CHRW 38.35, -3.79) lost 5.3% after quarterly revenue failed to meet analysts' estimates. The company reported that its top line shrank 6.9% year-over-year.
In the consumer staples sector (-1.5%), beverage names underperformed as Coca-Cola (KO 43.40, -1.48) lost 3.3%. The company lowered its full-year earnings estimates below consensus. SABMiller (SBMRY 56.25, -1.40) ended lower by 2.4% amid reports that the company has ordered employees to halt integration work with Anheuser-Busch InBev (BUD 121.94, -4.66). The move followed yesterday's revised bid for the company.
The U.S. Dollar Index (96.81, -0.36) finished near its session low as the euro and the pound gained against the greenback. The single currency gained 0.6% against the dollar (1.1054) while cable jumped 0.5% (1.3195). The two currencies notched highs against the dollar after the release of the FOMC's July policy statement. Separately, the dollar/yen ended higher by 0.5% (105.20).
Treasuries ended higher as yields declined throughout the complex. The yield on the 10-yr note slipped six basis points to 1.51%.
Today's trading volume was above the recent average as more than 960 million shares changed hands on the NYSE floor.
Today's economic data included the weekly MBA Mortgage Index, Durable Orders for June, and Pending Home Sales for June:
•The weekly MBA Mortgage Index showed a seasonally adjusted decrease of 11.2% in mortgage applications after declining 1.3% in the prior week.
•Durable goods orders declined 4.0% in June ( consensus -1.0%) on top of a downwardly revised 2.8% decline in May (from -2.2%).
•Excluding transportation, orders were down 0.5% ( consensus +0.2%) on the heels of a downwardly revised 0.4% decline in May (from -0.3%).◦The June report was particularly disappointing since it revealed order declines in just about every category -- and a number of categories, including primary metals, registered a second consecutive monthly decline in orders.
◦The notable exception in June was orders for motor vehicle and parts, which increased 2.6%. The only other area to see in an increase in orders was electrical equipment, appliances and components (+0.8%).
◦Nondefense capital goods orders, excluding aircraft, were up 0.2% after a 0.5% decline in May.
◦This metric is seen as a proxy for business spending, so it holds a little silver lining for June; however, it would be remiss not to mention that they are down 3.8% year-over-year.
◦ Shipments of these goods, which factor into GDP computations, declined 0.4% in June after falling 0.5% in May.
◦On a year-over-year basis, durable goods orders are unchanged. Excluding transportation, they are down 1.1%.
•Pending Home Sales for June rose by 0.2% while the consensus expected an uptick of 1.1%. Separately, the May decline was unrevised at 3.7%.
Tomorrow's economic data will include weekly initial claims ( consensus 260k) and June International Trade in Goods ( consensus -$61.2 billion), which will each cross the wires at 8:30 ET.
•Russell 2000 +7.3% YTD
•Dow Jones +6.0% YTD
•S&P 500 +6.0% YTD
•Nasdaq Composite +2.6% YTD

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