Day Traders Diary


The major averages trade on a higher note at midday as participants assess a string of recently-released economic reports. The Nasdaq Composite (+1.0%) leads the S&P 500 (+0.6%) and the Dow Jones Industrial Average (+0.6%). The three indices currently sport week-to-date gains between 0.3% and 1.9%.


Equities began the day on a choppy note as investors pored over a raft of economic data. The Retail Sales Report for August came in weaker than expected, adding to concerns surrounding third quarter GDP. Retail sales declined 0.3% ( consensus -0.1%) in August while retail sales excluding autos fell 0.1% ( consensus +0.3%). Meanwhile, the Producer Price Index (PPI) continues to signal a tepid inflation trend. PPI was flat in August ( consensus +0.1%) while core PPI rose an in-line 0.1%.


The two readings took their toll on rate hike expectations for the coming months. The fed funds futures market indicates that the implied probability of a rate hike at the September meeting fell to 12.0% from 15.0% in the previous session. The odds of a rate hike at the December meeting have declined to 47.4% from 52.9%. However, the U.S. Dollar Index (95.34, +0.01, +0.01%) treads water amid a downturn in the pound. Sterling has been under pressure as investors respond to the Bank of England's latest policy decision. The central bank opted to maintain its monetary policy stance, but indicated that further easing could be on the way. In addition, the dollar has been resilient against the euro after a morning decline.


The benchmark index has enjoyed a bid through the first half of trade, rebounding from sharper losses in the prior week. All ten sectors trade in the green with health care (+0.7%), technology (+1.4%), and energy (1.4%) leading the advance. The remaining gainers sport upticks between 0.3% (utilities) and 0.6% (telecom services). Other factors impacting today's trade have featured a rebound in crude oil and a mixed performance in the Treasury market.


In the influential technology sector (+1.4%), Apple (AAPL 114.88, +3.11) continues to outperform amid increased expectations surrounding iPhone 7 sales. The company confirmed earlier that it sold out of the initial quantities of the iPhone 7 Plus. The Dow component is also benefiting from bullish comments from Credit Suisse and BTIG Research. Apple has rallied 11.4% this week, compared to a gain of 3.0% in the broader sector. Meanwhile, iPhone supplier Skyworks (SWKS 76.37, +3.97) tops the PHLX Semiconductor Index (+2.1%).


Biotechnology trades ahead of the broader health care space (+0.7%), evidenced by the 0.9% gain in the iShares Nasdaq Biotechnology ETF (IBB 288.62, +2.63). Vertex Pharmaceuticals (VRTX 92.57, +2.45) outperforms after Stifel increased its price target on the stock to $109 from $105. The broader ETF has jumped 3.6% this week while the broader sector has ticked higher by 0.7%. Separately, AbbVie (ABBV 63.18, -0.16) underperforms, ticking lower by 0.3%.


The financial sector (+0.4%) underperforms as heavily-weighted Wells Fargo (WFC 45.81, -0.71) underperforms. The stock continues to see pressure after reports indicated that Federal prosecutors in California and New York are investigating the bank's sales practices. Meanwhile, insurer MetLife (MET 44.45, +0.67) outperforms amid some steepening in the yield curve.


Treasuries trade on a mixed note as the short end of the curve outperforms. The yield on the 2-yr note has declined two basis points (0.74%) while the yield on the 10-yr note has risen two basis points (1.72%). The long end of the curve underperforms following the tepid, but firming inflation reading.


Today's economic data included weekly initial claims, retail sales for August, PPI for August, the Philadelphia Fed Survey for September, the second quarter current account balance, Empire Manufacturing for September, Industrial Production and Capacity Utilization, and Business Inventories for July:


Jobless claims for the week ending September 10 were 260,000 ( consensus 263,000), up 1,000 from the prior week and the 80th straight week they have been below 300,000.

Continuing claims for the week ending September 3 were 2.143 million, also up 1,000 from the prior week.

Total retail sales declined 0.3% in August ( consensus -0.1%) after increasing a revised 0.1% (from 0.0%) in July.

Excluding autos, retail sales declined 0.1% ( consensus +0.3%) after declining a downwardly revised 0.4% (from -0.3%) in July.

Total PPI was unchanged ( consensus +0.1%) after declining 0.4% in July. Core PPI, which excludes food and energy, was up 0.1% ( consensus +0.1%) after declining 0.3% in July.

Producer pricing trends are improving, yet inflation rates still remain comfortably below the Fed's comfort level.

The Philadelphia Fed Index checked in at 12.8 ( consensus 0.0) versus 2.0 in August. That marked the first time since last August that the index has registered two consecutive positive readings.

The current account deficit for the second quarter totaled $119.9 billion while the consensus expected the deficit to hit $122.8 billion. The first quarter deficit was revised to $131.8 billion from $124.7 billion.

The Empire Manufacturing Survey was little changed at -2.0 in September ( consensus 0.0) versus -4.2 in August. The dividing line between expansion and contraction is 0.0.

Industrial production declined 0.4% in August ( consensus -0.3%), which wasn't a complete surprise, after increasing a downwardly revised 0.6% (from +0.7%) in July.

The capacity utilization rate dropped to 75.5% ( consensus 75.7%) from 75.9%.

Total business inventories were unchanged in July ( consensus +0.1%) following an unrevised 0.2% increase in June. Sales were down 0.2% after increasing 1.0% in June.

Inventory-to-sales ratio for July held steady at 1.39

For more on these economic releases, be sure to visit's Economic Calendar page.

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.