Day Traders Diary

3/15/13

The major averages finished the week on a lower note and the S&P 500 shed 0.2%. Elsewhere, the Dow Jones Industrial Average declined 0.2% and snapped its streak of ten consecutive gains.

Equities slipped out of the gate with today's quadruple witching providing additional volume at the start. The lower open was then followed by another slip when the University of Michigan Consumer Sentiment Survey was reported below expectations. For March, the preliminary Survey fell to 71.8 from 77.6. Meanwhile, the Briefing.com consensus expected the reading to remain at 77.6.

After receiving the final economic data point of the day, the S&P 500 reversed and headed back towards yesterday's close.

By midday, the index was able to climb within one point of its flat line. However, the average could not muster additional strength, and instead began a steady slide back towards its lows.

The S&P 500 did see its now-familiar final-hour wave of buying, but that effort was merely able to bring the index back to the middle of today's range.

A handful of items made the session notable. The first noteworthy item was the lack of defined sector leadership. During this year's market rally, most sessions ended with either cyclical or defensively-oriented sectors clustered in the lead. Today, utilities and financials ended atop sector rankings.

The defensively-oriented utilities sector saw a steady morning bid before spending the afternoon near its best level of the day. The SPDR Utilities Select Sector ETF (XLU 38.13, +0.25) ended higher by 0.7%.

Financials were in focus after the Federal Reserve released the second part of its CCAR report. The results of the stress test showed that only Ally Financial and BB&T (BBT 30.98, -0.75) failed to meet requirements. Meanwhile, Goldman Sachs (GS 154.84, +0.82) and JPMorgan Chase (JPM 50.02, -0.98) will need to resubmit capital plans by the end of the third quarter. Shares of Goldman Sachs ended with modest gains while JPMorgan Chase slid 1.9% after bank executives testified before a Senate subcommittee regarding losses stemming from last year's "London Whale" trade.

Another item of note was the mixed performance observed within the technology sector. The SPDR Technology Select Sector ETF (XLK 30.20, -0.12) lost 0.4% while its largest component, Apple (AAPL 443.66, +11.16), found buyers who helped the stock rise 2.6%.

The relative strength of Apple prevented the tech sector from logging wider losses. Major components traded lower as Google (GOOG 814.30, -7.24) and International Business Machines (IBM 214.92, -0.88) saw respective losses of 0.9% and 0.4%. In addition, chipmakers were broadly weaker and the PHLX Semiconductor fell 1.7%.

The selloff in microchip manufacturers may be perceived as a sign of exhaustion after the 30-stock group had risen more than 13.0% since the start of the year. Meanwhile, the entire tech sector has only gained 4.2% so far in 2013.

The final noteworthy item was the lack of a significant move in the CBOE Volatility Index (VIX 11.42, +0.12). With stocks spending the day in negative territory, the short-term volatility measure added just over 1.0%, suggesting downside protection was not being sought out actively. Including today's gain, VIX remains at levels last seen in early 2007.

In addition to the previously mentioned University of Michigan Survey, the market received a heavy dose of economic data today.

A surge in energy costs led to the CPI increasing 0.7% in February after reporting no growth in January. The Briefing.com consensus expected the CPI to increase 0.5%. Gasoline prices increased 9.1% in February, which was the largest monthly gain since increasing 20.5% in June 2009. Meanwhile, food prices rose 0.1% after holding flat in January.

Excluding food and energy, core prices increased 0.2% in February, down from a 0.3% gain in January and exactly in-line with consensus expectations.

Industrial production increased 0.7% in February after reporting no growth in January. The Briefing.com consensus expected an uptick of 0.4%. Capacity utilization rates rose from an upwardly revised 79.2% (from 79.1%) in January to 79.6% in February. The consensus expected utilization rates to increase to 79.4%.

The Empire Manufacturing Survey for March registered a reading of 9.2, which was down from the prior month's reading of 10.0. Economists polled by Briefing.com had expected that the survey would slip to 6.5.

January net long-term TIC flows report indicated a $25.7 billion inflow of foreign capital into U.S. denominated assets. This follows the prior month's $64.2 billion inflow.

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