Day Traders Diary

1/28/13

The major averages ended today's session largely where they began. The S&P 500 and Dow registered modest losses, while the Nasdaq added 0.2%, seeing relative outperformance from Apple (AAPL 449.83, +9.95). The largest tech stock ended higher by 2.3% after disappointing earnings caused it to lose nearly 13.0% last week.

While Apple contributed to the relative strength of tech stocks, the remainder of the sector traded in mixed fashion. A notable sector component, Seagate (STX 37.41, +0.16), gained 0.4% ahead of its earnings report scheduled for an after-hours release. An upbeat report has been largely priced-in as Seagate has soared nearly 50.0% in the eight weeks leading into this evening's report. The Capital IQ consensus expects the hard drive manufacturer to report earnings of $1.27 on $3.57 billion in revenue.

As tech stocks registered gains, the materials sector was the weakest performer. The observed weakness resulted from a Goldman Sachs downgrade of the U.S. steel sector. Following the downgrade, steel stocks saw broad selling and the Market Vectors Steel ETF (SLX 48.26, -0.70) shed 1.4%.

While materials lagged notably, the discretionary sector also exerted some downside pressure on equity indices. One pocket of weakness was among homebuilders, which slipped to their respective lows after the December pending home sales report pointed to a 4.3% month-over-month decline. Among individual builders, PulteGroup (PHM 20.96, -0.71) lost 3.3% and Lennar (LEN 41.91, -1.16) shed 2.7%. Meanwhile, the broader SPDR S&P Homebuilders ETF (XHB 28.81, -0.30) slipped 1.0%.

Elsewhere in the discretionary space, Jos. A. Bank (JOSB 39.28, -6.99) plunged 15.1% after the company said it expects its full-year 2012 net income to come in roughly 20.0% below its 2011 level. The cautious guidance spilled over to other apparel producers, which traded with a bearish bias.

On the earnings front, the market received just one notable report ahead of today's open. Caterpillar (CAT 97.45, +1.87) ended higher by 2.0% after the industrial heavyweight reported mixed results. Though the company beat the Capital IQ earnings estimate, its bottom line suffered a year-over-year decline of 17.7%.

Crude oil climbed steadily during afternoon trade and ended higher by 0.7%. The energy component settled at $96.51 after trading in a relatively narrow range.

Although the key indices ending mixed, the CBOE Volatility Index (VIX 13.63, +0.74) added 5.7%. This move suggested that near-term downside protection continued receiving interest.

Trading volume was below average as just under 650 million shares changed hands on the floor of the New York Stock Exchange.

Looking at the S&P 500 sectors, technology (+0.3%) led the way while telecoms (+0.2%), and consumer staples (+0.1%) followed closely. On the downside, materials (-1.0%), consumer discretionary (-0.5%), and financials (-0.5%) lagged.

Besides the previously mentioned December pending home sales report, the market received news of December durable goods orders.

The Census Bureau reported that December durable goods orders rose by 4.6%. This was well ahead of the 1.6% increase which had been forecast by the Briefing.com consensus. As expected, aircraft orders were a primary factor for the surge in orders. Nondefense aircraft orders increased 10.1% while defense aircraft orders rose 56.4%.

Excluding transportation related items, durable goods orders increased by 1.3%, which was better than the unchanged reading that had been broadly anticipated. The increase in ex-transportation orders was at odds with the contractions reported by many of the regional manufacturing surveys. Surprisingly, the gains in orders outside of transportation were due to strong demand for primary metals (3.6%) and fabricated metals (1.2%). This could suggest that manufacturers of finished goods are demanding more raw materials because they expect demand to rise in the near future.

In tomorrow's economic data, the November Case-Shiller 20-city Index will be reported at 9:00 ET. In addition, January consumer confidence will cross the wires at 10:00 ET. In notable earnings, Ford Motor (F 13.78, +0.20) will report its fourth quarter results ahead of the open.

The U.S. Treasury will auction off $35 billion in 5-yr notes.


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